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Should We Be Leery of the Generosity of the Uber-Rich?

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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….

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111 comments

  1. Deus-DJ

    Ah!

    I merely skimmed through this posting of yours, but a necessary philosopher who had something to say of charity by the rich was none other than Reinhold Niebuhr. To give you a simple summation of what it was he said: Charity merely shows the egoism of the higher classes. To give you the nitty gritty, I shall leave that to none other than DownSouth….

    *drum-roll*

    1. Yves Smith Post author

      I have no doubt he will provide an apt quote or two. What I am suggesting here (and am curious to see whether readers agree or not )is that the charitable giving of Gates et al manages to make generous robber barons and members of the old landed gentry look good.

      Plus I am fond of Carcinoma Angels and have been looking for an excuse to refer to it :-)

    2. DownSouth

      Deus-DJ,

      Well I hope this isn’t throwing too much of a curve ball, but I’m going to quote what you might deem to be an unlikely source, and that is one of the many verses that deal with charitable giving that appear in the Bible:

      So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by men. I tell you the truth, they have received their reward in full. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.
      –Mathew 6:2-4

      Perhaps this needs to be put in context, which David Sloan Wilson provides:

      Religious denominations range from huge established churches that encompass most of the population, to tiny sects that reject the larger churches as corrupt and regard themselves as keepers of the original faith…

      Long ago, religious scholars noticed that these three categories are related to each other in a systematic way: The churches of today are the sects and cults of yesterday… Religious denominations seem to have a life cycle. They begin as sects or cults, grow into churches, give rise to offspring sects, and then mysteriously senesce, to be replaced by their own offspring or by new cults.

      [….]

      Jesus emphasized the moral side of Jewish law more than its ethnic or ritual side, so much that the mere fact of being a Jew ultimately became neither necessary nor sufficient to be among the chosen.

      [….]

      Like most sects, the early Christian Church was designed to benefit those who had become neglected and abused by the worldly society. Its intense egalitarianism and commitment to altruistic love also attracted wealthy members, such as Justin, who cherished these values regardless of their own station in life.

      [….]

      [In the early Christianity Church] There is a policy of extreme altruism and forgiveness toward the downtrodden (even if they are not likely recruits), and a policy of unyielding opposition toward those who are in league with Satan. But who is in league with Satan? For Jesus and the authors of the Gospels, the main Jewish religious institutions were the most important enemy, not the Roman Empire.
      –David Sloan Wilson, Darwin’s Cathedral: Evolution, Religion, and the Nature of Society

      On a personal note, let me note that I was raised a Southern Baptist, so harbor many resentments against that particular congregation. I currently hold myself out to be an agnostic. However, I find many of my core beliefs derive from the teachings of the early Christian Church.

  2. attempter

    When we look at elitist charity we find that almost all of it is, well, elitist, a version of trickle-down. Noblesse oblige indeed. There seem to be zero examples of money being used to help the producers to run their own affairs. Why would there be? – it directly contradicts elitism.

    I’ve looked in vain for examples of anyone who wants to teach a man to fish instead of just giving him a fish.

    So that’s the way it is in the best case scenario. But it’s often far worse – “philanthropy” as a neoliberal trojan horse. Thus we’ve seen the likes of Gates, Soros, and others pushing GMOs and agrofuels, and at least implicitly supporting the new form of colonization, Western multinationals making deals with indigenous kleptocracies to “lease” land for ostensibly public-benefit purposes. of course in practice the reality is always a criminal land grab from the people who live on the land, often disenfranchised tribes, for the sake of profit and resource looting.

    The first example which always springs to mind for me is Goldman’s African small-businesswoman mentoring “charity”. What a scam – it looks great from the point of view of misdirectional liberal identity politics, while its real goal is to indoctrinate an African version of the old Chilean Chicago Boys. If Blankfein gets his wish, we’ll get a female African Pinochet.

    Anyone who truly wanted to use wealth to better the lives of the downtrodden would help them establish worker-controlled economies.

    1. Bates

      attempter…excellent observations.

      Teaching everyone in the world that humans need little but want much is of utmost importance to the people but at odds with the lords of credit. The needs of all people can be satisfied but the wants of people are limitless…Ghandi realized this and said as much…But, ‘want vs need’ is seldom taught, and will not be emphisized…Because the structure of all power depends on the wants of individuals, not the basic needs of individuals. Every individual, even those in the meanest of circumstances, realizes that their needs are water, food, shelter, clothing, and occasional medical care. Beyond those basics lie the dragons of want, the dragons of debt servitude, the dragons that make debt slaves of free people. I would rather be a frugal free man than live in the finest castle that did not belong to me. If enough people believe this this way, and act on their belief, governments will again become responsive to the governed. Yes, it is really that simple.

      Did Gates or any wealthy Victorian take a vow of poverty? Are their aims altruistic or do they really feel sorrow when they see some people starving while others grow obese? What are the goals of relions that provide charity to the needy…are there not strings attached?

      Human nature is the one constant that we can count on throughout history…it is ‘the tell’. The mind of Gates was no different in basic function than that of Carnagie, Astor, Vanderbilt, et al.

      “Our species is the only creative species, and it has only one creative instrument, the individual mind and spirit of a man. Nothing was ever created by two men. There are no good collaborations, whether in art, in music, in poetry, in mathematics, in philosophy. Once the miracle of creation has taken place, the group can build and extend it, but the group never invents anything. The preciousness lies in the lonely mind of a man.
      And now the forces marshaled around the concept of the group have declared a war of extermination on that preciousness, the mind of man. By disparagement, by starvation, by repressions, forced direction, and the stunning blows of conditioning, the free, roving mind is being pursued, roped, blunted, drugged. It is a sad suicidal course our species seems to have taken.
      And this I believe: that the free, exploring mind of the individual human is the most valuable thing in the world. And this I would fight for: the freedom of the mind to take any direction it wishes, undirected. And this I must fight against: any religion, or government which limits or destroys the individual. This is what I am and what I am about. I can understand why a system built on a pattern must try to destroy the free mind, for it is the one thing which can by inspection destroy such a system. Surely I can understand this, and I hate it and I will fight against it to preserve the one thing that separates us from the uncreative beasts. If the glory can be killed, we are lost.”

      John Steinbeck

      1. DownSouth

        Bates,

        Your comment starts out great, but then with your worshipful adulation of individualism, you rapidly degenerate into simplistic and doctrinaire half-truths.

        The myriad innovations to come out of group endeavors like Bell Labs and NASA belie your blinkered and unidimensional worldview.

        This report from the National Science Foundation also points out how innovation and creativity may be far more complex than what your reductionist dogma allows:

        Scientific discovery and innovative engineering design are complex cognitive, social, and sociological acts and have been studied at many different levels. The history, sociology, and philosophy of science and technology are thriving entities, with large conferences and highly competitive journals. Researchers in these disciplines are making important contributions to our understanding of the larger scale levels of discovery and innovation.

        [….]

        More than ever the complexity of science requires group efforts as teams of scientists from diverse backgrounds work together to make discoveries and solve problems. Much research has shown that group interaction can be detrimental to the creative and innovative process (Paulus, Brown). Groups may lower motivation, inhibit creative responses, and distract from the deep reflection necessary for scientific discoveries. However, groups that function in an efficient manner and mix reflective periods with appropriate and attentive group interactions can be quite innovative (Brown; Sawyer). The time to be alone or allowing for socially stimulated ideas to incubate is an important part of the innovative process (Brown, Csikszentmihalyi). Trained groups, groups with diverse perspectives, and groups that effectively integrate newcomers are most likely to exhibit a high level of innovation (Levine, Paulus). A critical factor in the cognitive stimulation of creativity in groups is the extent to which ideas from others stimulate the use or combination of unique categories of knowledge (Brown, Paulus).

        There are significant gaps in our understanding of the optimal distribution of knowledge and skills in a team. Assuming limits in time for skill and knowledge acquisition, how should expertise be distributed in a team? How much overlap? Is it important to have more than one of a particular knowledge area (for both intellectual and social support) in a team? What types of leadership are required for effective functioning of diverse teams? What about team size? Is there an optimum size for certain stages of investigation or certain fields? It is presumed that groups with diverse knowledge domains/skills will inevitably have a greater chance of innovation than less diverse groups. However, the literature suggests that diversity in groups has positive effects on innovation only under specific conditions [13]. One important factor is the attitudes team members have toward diversity. Teams with positive attitudes are more likely to show enhanced creativity in diverse groups [14]. Individuals were assessed for their attitude toward working in diverse groups. They generated ideas in groups of three or four. Groups that were ethnically and linguistically diverse and that had a positive attitude toward working in diverse groups generated higher quality ideas (see Fig. 1).

        1. Progressive Ed

          So the NSF has determined that the key to scientific creativity is “diversity”. Wow! Now the scientific advances of the USA can really take off. I can hardly wait.

          1. DownSouth

            Well actually the idea has been around for quite a while, gaining credence during the Renaissance and given another big boost by the American Revolution.

            Diversity and non-conformism are essential to radical innovation and scientific advancement. But if you’ve got some empirical evidence showing that isn’t true, why not share it with us?

    2. psh

      Butbutbut the Threshold Foundation. Almost no profile, virtually anonymous except for the board, giving is diffused among lots of hobbyhorses but bottom-up civic participation is a prominent theme. For the donors, lots of working on yourself. Still vulnerable to the “Who elected you?” gibe but on balance not so very malevolent.

  3. spc

    Well, Mr. Gates is strangely attracted to monopolies in his charity efforts:

    - African famine – Monsanto can help. Ohhh sure they can…

    - Education – good ol’ Microsoft is there to wipe out competition,Sorry… I mean, to fight for better future of children.

    I fear the Greeks, even when bringing gifts.

  4. NS

    “for-profit philanthropy”
    Yves: “How charitable is charity when it winds up being simply another mode of expression of power and prestige?”

    I’m very glad you wrote about this. The answer to the question is that it can’t be, ever. For profit philanthropy is an oxymoron. While it might work in limited areas of the arts; for the real needs of people lacking basics, it’s completely and totally wrong-headed double-speak and an assault on basic human rights. This is lame attempt of manufacturing good will and PR while the consequences of their ideologies play out in the harshest terms for honest schmucks and disenfranchised here and around the world.

    Do they know how transparent it is? Apparently not. For this nobody, it gives me the creeps and makes my skin crawl more than any Stephen King novel would.

    We can see the results right here at home in the for-profit models in health care. That banal cabal continues to exact their pounds of flesh of the most vulnerable of people from the safe distance of their executive suites and golf course retreats.

    In old fashioned terms, this is called ‘lording’ over people with the power of their wealth. I am not amused, in fact, I see this as just another way of gaining more power and control over masses and capturing their productivity far into the future. Now it will include those silent angels no one sees doing the hard work with very small monetary rewards. It minimizes, cheapens their work while attempting to twist it into a just another means of rewarding themselves. Its merely providing a mechanism for the uber-wealthy to look in the mirror daily to see something besides the reality of their malevolent souls.

    Rand would be pleased as her philosophy about altruism is clearly laid out in her works as a worthless and even an evil endeavor.

    Karma can be interesting, I hope I live to see the payback.

  5. purple

    It seems like some territorial challenge to the Rockefeller wing of foundations.

    And it’s not much money. How much is $200 billion these days when you start talking about meeting payrolls, pensions, and the like ? The Los Angeles School District by itself has a budget of $7 billion a year, without including pension obligations.
    Because of that, like all foundations, it will be populated with meritocrats who will use its sway (ie endowment) to try to get government contracts, for instance on charter schools. In other words, it’s a well thought out strategy to exact leverage in the looting of the public sector.

  6. Defender_of_Capitalists

    Hi everyone,

    Yves great site, but I must say that the lean towards liberalism and anti-wealth (especially from your commentators) is getting a little hard to swallow.

    While there is some merit to your argument about the wealthy wanting prestige from their donations, many of these people have “Mastered” our capitalist system…. and I think they genuinely believe their investments can change the world. Of course its social engineering.. but so is govt and other social orgs. And what makes you (or your readers) feel like the govt. will do better?

    One last comment, to someone mocking te Gates education efforts, I know a few years ago in some form he wanted to offer a competition/rewards system which would pay top paying performers (teachers) from all schools.. but teachers unions wouldn’t allow it as it would create “competition” (gasp.. its evill.. just like money) and unfairly reward some.

    So, ultimately competition is GOOD… and while always not the end all-be-all (i’m rational here) having wealthy who have made fortunes, especially non-hedge fund/PE/Ibanking ones lead social change is just fine by me! Fire away!

    1. Bob Visser

      Tks for a wonderful analysis. References to Pride and Prejudice (Darcy) as well as Carnegie, are indeed valid examples when one considers individuals only. Not applicable in the present case though. What we have here is a mass-conversion. The word that did come to mind when reading your article is: “Indulgences”.
      In Catholic theology (according to Wikepedia)an indulgence
      is the full or PARTIONAL remission of temporal punishment, due for sins which have already been forgiven (by the capitalists). IMO the Teaparty supporters are still on the warpath, looking for a FULL remission. Fearing their assaults, the united billionairs are trying to preempt them. This has nothing to do with prestige as the Defender of Capitalists wants us to believe, but everything with great fear for what will happen in the USA in a very near future.

    2. liberal

      Yves great site, but I must say that the lean towards liberalism and anti-wealth (especially from your commentators) is getting a little hard to swallow.

      Speaking only for myself, I have nothing against _real_ capital, or people making money from productive uses of capital, or attaining great wealth that way.

      The problem, which I’d wager Yves would agree with, isn’t capital in the classic sense of the word, in a competitive market. The problem is rent seeking and rent collection.

      If you look at the world’s richest people, most of them got that way via rent collection. Around the USA, the typical really wealthy person got that way by “investing” in real estate, which is really land. Land isn’t capital in classical economics, even if modern economists have managed to bastardize their science to blur the distinction. An “investor” in land is creating nothing new (I’m not referring to actual capital improvements, but rather the land itself; the landowner isn’t the one who generates increases in site value).

      As for the example of Bill Gates? Not a capitalist, but another rent collector. Aside from having a virtual monopoly on many classes of computer software, Gates is the beneficiary of government largesse in the form of government-granted monopoly rights (unfortunately mislabeled “intellectual property” these days).

      1. Progressive Ed

        Living in Silicon Valley, it seems to me great wealth is from IPO’s. This is the result of a type of market force, but the wealth is not the result of the sale of a better product or service, but the sale of stock that was initially purchased at…$0. When you are up close and personal to the SV game, it’s interesting how many start ups are purchased by successful firms, both who are linked to the same VC firms. Who said the rich get richer? Anyway, is this the same as “rent seeking”?

        1. liberal

          Anyway, is this the same as “rent seeking”?

          Depends how much of the company’s income stream is due to rents.

          In principle, a firm receiving “outsized” returns on its products/services that doesn’t collect rent will see its margin eventually squeezed by competition. At the beginning, though, it might have enough of a jump on its competitors to earn lots of money for awhile.

          A reasonable place to start reading is the Wikipedia page on economic rent.

          Be aware that the classic case of rent, the one that the definition comes from, is land, which in classical economics is all land plus other natural resources, including the radio spectrum.

          The value of an urban site is also capitalized rent, because the owner of the site didn’t produce the value, but rather activities on neighboring parcels did.

          Microsoft collects monopoly rent. The monopoly comes from a couple places. One, obviously, is government enforcement of Microsoft’s monopoly via software and patents. Of course, other firms could offer operating systems (and e.g. Linux is free). But to some extent, due to the desirability of interoperability and retraining costs, there’s a “network effect”: if the vast majority of people use Microsoft, then there’s a huge incentive to also use it to fit in with everyone else. (Ex: I don’t have MS Office at home, and it makes it a bit more challenging to deal with docs from work, since OpenOffice’s rendering of MS stuff isn’t perfect.) So monopolies can arise from network effects. Presumably something like Facebook is another example. While Facebook might be well-executed, a competitor would have trouble making inroads because FB already has so many users, and would refuse to allow strong connections to the competitor. And a social networking site is more powerful the more users it has.

    3. Albertson

      “Of course its social engineering.. but so is govt and other social orgs. And what makes you (or your readers) feel like the govt. will do better?”

      So you would rather have, for example, hedge fund managers set the course for the planet?

    4. carol

      Hi defender,
      “…anti-wealth (especially from your commentators) is getting a little hard to swallow. ”

      It is NOT anti-wealth, it is anti the way the wealth is obtained!

      It is also anti the way the wealth is kept unimpaired by tax evasion and by lobbying for loopholes.

      you also write: “… having wealthy who have made fortunes..”

      There are plenty of wealthy who haven’t made anything: the estate tax rates are too low!!
      In many countries the top estate tax rate is less than the top income tax rate, and only kicks in at a huge amount.

  7. bob

    But you left off the best part of the Spinrad story – how Wintergreen addresses his cancer, complete with the twist at the end.

  8. Dave of Maryland

    It’s always nice when the rich remember the rest of us. The long-term effect? Nil, or nearly so.

    The example is Dickensian London. Lots & lots & lots of 19th century charity, but overall destitution & squalor. Philanthropy, even unlimited, can’t fix a bad system.

    Then there’s the NHS. The NHS – not charity hospitals – single-handedly transformed British health. Improved the lives of every single person living there. No amount of philanthropy could ever do that.

    The NHS, by the way, was boldly enacted at a time of extreme deprivation. How deprived? For years after the war, there were no books in the stores. After the war, the UK government clung to 400,000 German POWs, which they used as slave labor in the fields. For three years, to 1948. (Thousands of them committed suicide as a result. Some 15,000 others found English brides.)

    In 2010, we have a government problem. We don’t have a crisis of capitalism, we have a crisis of government.

    (I had a blue-screen error. I’m surprised any of this survived. It only happens once a week, so I’m safe now.)

    The rise of philanthropy brings us to an ugly choice: Will we continue with ever more corrupt “democracies”, or will we consider what is now staring us in the face: A return to hereditary kings?

    Bill Gates is taking the cheap way out. Throwing money at people & problems and then walking away when when it suits. When his attention flags. The king – or lord of the manor – did not have that option. The king was there for life. He had no choice. If the masses revolted, it would be his head on a pike. Warren Buffet will not risk that.

    Mayor Bloomberg, it seems, may be the prototype of a transitional government, a “democracy” that merely ratifies the king’s continuing rule. If he’s doing a good job (I’ve not been in New York for a decade), are you sure you want to see him go, to be replaced by the usual mindless corruption?

    Rule by kings, by lords of the manor, has stood the test of time. Many, many centuries. Democracies, so far as I can see, always, eventually, collapse, and sooner rather than later. A democracy that lasts two or three centuries is an extraordinary accomplishment – as Ben Franklin well-knew (no dummy, he). Are kings nice people? No. They rarely ever were. But what king, in what kingdom, would dare permit 20% unemployment? Massive poverty? What king would dare field a massive army under such appalling conditions?

    1. DownSouth

      Dave of Maryland,

      I can’t find much in your comment to throw stones at, but I wonder if you’re not being too pessimistic when you state:

      “The rise of philanthropy brings us to an ugly choice: Will we continue with ever more corrupt ‘democracies’, or will we consider what is now staring us in the face: A return to hereditary kings?”

      As Kevin Phillips documents quite thoroughly in Wealth and Democracy, the United States has had these periods of decadence and degeneracy before, most recently during the Gilded Age and the Roaring Twenties. But it has managed to recover and again provide some modicum of social justice for its people.

      Can it do so again, or is the country too far gone?

      Phillips, like yourself, is not optimistic, but he nevertheless doesn’t shut the door on the possibility of a comeback.

    2. NOTaREALmerican

      The “king” (perhaps) can be other than a person too. The “king” is just a symbol for authority. The Chinese are attempting to create a Party “King”. Our elite have been trying to create a Corporate “King” (fascism, of course). It’s the symbol of King-like authority that matters to the peasants. I think the Chinese modal will eventually be the successful one as they’ve got the advantage of a few dead guys (Mao and Marx) to stand-in for the real “King”.

      All hail THE King. (Whatever it turns out to be).

  9. richfam

    I have a headache… Suggest an alternative to Bill Gates giving away his money. Should he have never earned it, should it have been taxed away or maybe give it to a charity he has no control over? I mean, I get that its not his money, its the poeple’s money…sorry, couldn’t help it. Plus, I’m an apple user and think microsoft software stinks. This is just to cynical to take and I’m pretty cynical. He IS the king. He basically invented the lightbulb, right? whatever

    1. craazyman

      I have a headache too, but from seeing fellow good citizens of this country and others run into the ground by thoroughly corrupt and toxic systems of political economy.

      I think a reasonable case can be made that any reasonably enlightened society should have limits on wealth, just like speed limits on highways. And for the same basic reasons.

      Given mankind’s current level of soul development, I do believe that the possession of property, wealth, money, etc. fulfills a useful social functin as a means of protecting indiviudals from illnesses of group consciousness — such as tribalism, racism, homophobia, mysogeny, etc. — really any form of group-think that seeks to crush a subgroup as an outlet for thanatic (or thanatotic if one goes by the dictionary) violence. This is a force of nature that should be openly acknowledged. Wealth and money are the most elemental metaphors for life force, and once one has them, their status immediately jumps from a “resource” for some capitalist to rape, to a human being that must be contended with as such.

      Pursuit of wealth also channels thanatic energy, offering it an outlet that otherwise might be directed in physically destructive ways.

      However, establishing a limit on the amount of wealth that one person can own wouldn’t degrade its usefullness as a form of protection or an outlet for violent impulses.

      Instead, one could set the level to address both needs, and the amount above that one could acknowledge (as is often said on this blog) is partly a result of social cooperation and no longer merely individual enterprise.

      Beyond a certain level, the wealth could be used to invest in economically run down communities and regions. Sort of like the NFL draft, where the worst teams one year get the top draft picks the next. This allows for a certain competitiveness to be possible, which otherwise would not exist in a league dominated by big spending big city franchises. What fun would that be?

      Wealth and property are far too important to be footstools of ideologies. They really need to be analyzed in all their dimensions if a society wants to use these “technologies of the imagination” in an elightened way. And by enlightened I don’t mean in a saintly or prudish way, but in a way that best promotes the health of the individual and the health of the larger community. I think it’s a real tightrope walk to get this right. Communism did not, and as a result fell into the gulag and killing fields. But feudalism didn’t either, and princes and peasants resulted. I don’t think there’s a magic bullet on this one, but more a matter of maintaining a creative and ethical tension.

      1. richfam

        Most billionaires give it away it seems, so this is self imposed. Also, who determines how much you can keep, the council of wise elders? This kind of social engineering is dangerous.

        So Bill Gates, how did he make his money? He bought his invention from IBM, like that, right? Some combination of inventiveness and entrapreneurship? I think as soon as the wisemen get involved the invention goes away. Lightbulbs, movies, telephones, cars, feed the masses, etc.. make money.

        “Hey, wow thats a great idea! You’re selling a lot of those apple I-towels. That’s our money (we just spent) give it back to us otherwise the wise elders will put you in jail.” something like that

        1. liberal

          Some combination of inventiveness and entrapreneurship?

          No. Gates, like most of the wealthy, made his money by collecting economic rents. Therefore, his gains were ill-gotten and could be clawed back via taxation wtihout affront to justice or incurring inefficiencies.

          1. Richfam

            I get it, the wise elders should determine the fair profit margin for your product and the remainder shall be returned to the people. Fair enough. “rent seeking” – who coined this phrase so I can enter the way back machine and send this scoundrel to public school and state college.

            Cmon man this is grey clothes and bread lone stuff… Haha

  10. ella

    1. A pledge is not an enforceable contract.

    2. Who knows what wealth will exist upon the donor’s demise?

    3. It is far more beneficial to society for the Ubers to support the American worker with fair wages and benefits while employ then to establish a charity. Additionally, the Ubers should pay a fair tax to support the country and support polices that actually benefit the masses . The worker and the country can provide a greater benefit to the economy with more money.

    4. For example, their are many Americans educated in computer sciences who are unemployed because H1B’s are employed instead. This is true for several other industries. Companies should stop off shoring jobs and incorporating offshore to avoid taxes.

  11. koshem Bos

    Something here is logically inconsistent. The filthy rich are already filthy and rich. If they give to “charity” large amounts of money, a decision on the destiny of that money has to be made. Gates and Buffet make the decision on the money they fork over. If somebody else will make the decision, we have to rely on that individual/organization/government agency.

    Why would we rely on the latter to make a better decision? In addition, no matter who makes the decision, Gates and Buffet will be the obvious “owners.”

    1. readerOfTeaLeaves

      Well, I’m not a FOB (Friend of Bill [Gates]), but happen to live in an era and geography that have put me in reasonable proximity to people who — by their own telling — happened to be ‘in the right place at the right time’.

      The motivations of those that I’m acquainted with?
      Varied.
      The smarter ones actually care a lot, want to be very ‘hands on’, and engage with very specific problems, achieve specific outcomes, and make the world ‘a better, more humane place’. The most successful appear to keep a close eye on budgets, tightly focus their projects, and track outcomes; if something isn’t working, they adapt in an effort to re-track in an effort to correct course so that they can meet their objectives.

      When the Gates Foundation first gave grants for K-12 education projects in Washington State, they had criteria, and tracking. They gave over periods of 3 years, and if the school failed to meet (reasonably) its stated objectives for Years 1, it was on probation and received some extra assistance (and oversight) from the Gates Fdn for Year 2. If it failed in Year 2, it did not receive its Year 3 money. Meanwhile, those projects that continued to meet their stated educational objectives — and could show outcomes — were brought together by the Gates Fdn to exchange ideas, data, resources, and insights.

      Personally, I hardly view that as simply seeking to flatter the vanity of Bill or Melinda Gates.

      The Gates Fdn no longer makes those grants, and has turned its attentions elsewhere.

      But back to your point about ‘motivations’: some people just want the social connections, status, and ‘guilt-offloading’ (and tax bennies) that come with being involved in philanthropy.

      However, I can say without reservation — living in the Pacific Northwest region of the US — that there is a recent **style and approach** to philanthropy that is probably relatively new, and culturally distinctive.

      The ‘noblesse oblige’ that I’m familiar with is more Old Money, East Coast, a subtle way of appearing to do good while stacking up social status; the function is to be part of a certain social class, while doing something that provides a social benefit.

      The ‘entreprenurial philanthropy’ that I’ve been around is far more hands-on, **far** more familiar with budgets, with project management skills, with tracking outcomes. No one who’s merely in philanthropy for social status would be able to do this type of philanthropy for very long, IMVHO, because it is too intellectually, emotionally, and financially draining for anyone who lacks both vision and commitment.

      These philanthropists shun awards banquets, do not seek any personal recognition for their efforts, and would shrink at being in limelight; they’re far more engaged by the chance to ‘make a difference’ than by social attention.

      Their focus is on addressing and solving problems, often in very concrete — non-ideological – ways. Washington Women in Need (WWIN) tries to make it possible for just about anyone to be involved, and donates money to very specific need: a hearing aid for a client; a set of dental school tools for a mother of 3 who is returning to school to become a dental hygenist; things that are never going to put anyone’s name on a billboard or a library or an opera house, but that make a specific, concrete difference in the lives of families and individuals.
      ——–

      As for Bill Gates specifically, it’s public record that his mother was a regent of the University of Washington; his parents were long engaged in civic activities in Seattle, Washington. One of his father’s law partners [Jim Ellis] was extremely active in civic affairs (the cynical locals claim that this was related to his work as a bond attorney, but it is also the case that the kinds of civic skills had a huge impact on the development of the Seattle region). In the 1960s and 1970s, the Seattle region had a culture of civic engagement and civility of which Bill Gates’ parents were active members.

      It is not surprising, perhaps, that Wm Gates II (Bill’s dad), hoped that his son would use his wealth to make some impact on the lives of the least fortunate; that attitude is straight out of the civic culture of Seattle in the 1970s. Gates Sr. set up the origins of the Gates Fdn in University Village in Seattle, in what might be called a cubbyhole; his first assistant IIRC was a former MS exec (whose name escapes me at the moment…). I probably biked by the office untold times without any clue that Bill Sr. was working on what would later become The Gates Foundation; it’s a safe bet that watching one’s father labor (for free) on building a structure that could address serious global problems — during a period when, quite frankly, most governments seem pretty damn corrupt and a lot of businesses don’t seem that competent either — would have been a powerful model for anyone, presumably including Wm Gates III.

      I happen to know people (in education) who are deeply grateful to the Gates family, as well as Paul Allen and his generosity to education. Both philanthropists have a record of ‘investing in ideas’; people with good ideas and credentials have been able to do things with philanthropic money that would never have been possible any other way.

      Is this a perfect system? No.
      Do all of these philanthropists engage in their efforts so that you, me, or anyone else will admire them? In my personal observation, they do not. These truly are the quiet, unpretentious, smart, compassionate souls who simply want to do something meaningful with their lives, and simply writing checks that may be ill-spent, or underwrite more corruption, doesn’t cut it for them.

      Any interested readers may want to read ‘The Soul of Money’ by Lynn Twist to get some insights into the mindset of at least one of these
      new philanthropists’. It’s **not** about their personal egos; it’s about creating meaning for their lives, by trying to make the world a more decent place than hedge funds, corrupt governments, and ideologues have so far managed to do.

      For more if you are interested in the general topic of ‘entreprenurial philanthropy’, try these web addresses:
      Social Venture Partners (Seattle): http://www.svpseattle.org/
      Washington Women in Need: http://www.wawomeninneed.org/

      1. readerOfTeaLeaves

        One more link, should anyone find this and be interested:

        http://www.seedsofcompassion.org/
        Seeds of Compassion was originated to begin a much larger conversation about how to better understand, and build on, human development in order to make the world a more wise and compassionate place.

        I understand people here being very distrustful of motives for philanthropy, and much of it is ego-driven.

        But I can state from personal observation that much of the newer philanthropy stems from a search for meaning.

        1. John

          We don’t want their charity.

          We want decent jobs that allow us to be human beings controlling our own destinies.

          Their fortunes, one and all, were made on the blood sweat and tears of the people they used to accumulate it.

  12. Albertson

    Make no mistake, this is all about power and control and when you think about it, what better way to exert influence than to do so in the guise of a selfless and giving benefactor.

    Read through some of the pledge letters at givingpledge.org e.g. this is Ted Turner’s: http://givingpledge.org/#ted_turner

    More importantly, seek out the underlying foundations and take a look at the nature of the work they do, their mission statements and the grant recipients.

    In most cases what you will see is a pattern of social engineering shaped by the worldview of these individuals.

    If you are familiar with Mike Bloomberg, Ted Turner etc. and their views of society and the human condition you will discover that their foundations not only reflect those values but promote them. The leverage their money brings can expand their worldview by the subtle and not so subtle imposition of their social agenda on the organization that is the beneficiary of their largesse.

    Explore Turner’s foundation and what you see are admirable objectives about sustainability but dig deeper and you discover that Mr. Turner has strong views on subjects such as population control. He donated $1 billion to the UN and with that money a branch organization called The United Nations Foundation as created. Spend some time exploring what this foundation and its philosophies:

    UNfoundation.org/about-unf/the-turner-gift.html

    turnerfoundation.org/about/oh.asp

    Buffet, Gates etc. all have social agendas many linked to globalization themes. Others have specific interests and political agendas. Jeff Skoll, for example has some strong views on Middle East peace. Of interest his foundation funds filmmakers, documentarians etc. Global warming is a recurring theme with Skoll and most in this group. Skoll is all about social change.

    skollonline.com/blog/?page_id=289
    skollglobalthreats.org/climate-change.php

    Within this group there is an intertwined web of influence and common themes wrapped in worthy causes with shared views on sustainability, millennium development goals etc.

    This group and its affiliates are the self appointed masters of the universe who are focused on redesigning the planet in an image of their choosing. They are the 21st century version of the High Priests of global culture and society.

    None of this is not about charity, it is about power and only about power, the same thirst for power that has driven/consumed most of these individuals in their business lives.

    1. John

      Are we supposed to thank our masters for their “largess”?

      I would rather their keep their money and burn in hell.

  13. Psychoanalystus

    Anyone who is familiar with Bill Gates’ and Warren Buffet’s ascension, knows these two lack even the most basic elements of ethical business behavior, exhibiting and being driven by pathological levels of greed. Their recent appearances in places like the Charlie Rose Show, drumming up their so-called “charitable” endeavors leave this analyst unimpressed.

    Gates’ involvement in the developing world seems to be just a covert and desperate attempt to open new markets for Microsoft, beyond the already saturated ones in the US and Europe. However, I just don’t see how Indian manufacturers of $35 computers would be willing to pay Microsoft three times that much per license in order to install its buggy and decrepit Windows, when Linux is free and works so much better.

    As far as Mr. Buffet goes, he is just a ridiculous old man with severe ADHD symptomatology that just can’t seem to get his fill of money. Let us not forget that in his incessant quest for profits he was ready and willing to join hands with Goldman Sachs itself, the most corrupt and evil gang of banksters in the world. Mr. Buffet has proven times and again that he represents a particular kind of subhuman specimen lacking even the most basic of scruples and morals, ready and willing to do whatever it takes for a buck or two. Perhaps his conversion to Do-Goodism may have been more credible had it occurred before his 500-th birthday. Furthermore, it may have been more convincing, had he taken care of ALL his biological children, rather than ostracizing those who refuse to go to his church or subscribe to his narrow views. As such, late-life Damascus conversion remains phony and unconvincing. Sorry, old fogie, but you charitable “work” leaves this psychoanalyst rather unconvinced, so go sell your BS elsewhere. And, while at it, go give your daughter the $5,000 she needs to finish her kitchen so she can cook a decent meal for her family. You, greedy, ruthless fast-talking SOB, you!

    As far as Mr. Harry Wintergreen is concerned, one cannot feel sorry for him. He sounds like another intelligent, yet mentally unstable businessman, who most likely stressed himself out to the point of getting cancer. Perhaps he should have opened up a store selling baseball cards instead, as that line of work may have offered him a happier, longer, and less stressful life.

    Psychoanalystus

    1. John

      Buffet couldn’t even come up with what to do with his money. Since he doesn’t really care.

      The best he could come up with was to let Bill and Melinda handle the “giving” for him.

  14. Stick

    Great topic, Yves! I’m glad to see people are talking about this… My area of expertise is education policy. If you look at what the billionaire boys club is doing to public education and public debate over education policy then it is quite obvious that this new era of philanthropy is geared toward social engineering public schooling under the corporate model.

    You’ve accurately documented in these pages the public looting being carried out by the masters of the universe. I would encourage you [& your readers] to look into how the edu-preneurs are opening new avenues to tap public resources, such as charter schools and for-profit universities, and how all opposition to these policies is crushed beneath the false narrative of entrenched [status quo] interests vs. edu-reformers.

    The Gates, Broads, and Waltons fund all manner of think-tanks, policy centers, and “grass-root” groups that operate like sophisticated marketing machines to promote corporate narratives and obscure inconvenient truths emerging from the research community.

    1. Progressive Ed

      An interesting perspective. My impression is that a lot of the wealthy fund leftist projects (via think tanks, NGO’s, “research” orgs.) as a result of their guilt and desire to buy off the Progressives.

      1. liberal

        There’s not as much there as it would seem.

        First, given how old many of those foundations are, I would assume they often track leftward after the original tycoon is long dead.

        Second, they’re not as leftwing as they might appear. A lot of what e.g. the Ford Foundation does is pretty uncontroversial, apolitical stuff, like education (“good works”, so to speak).

        Contrast that to e.g. stuff funded by the Kochs. AFAICT it’s all political (e.g. Cato).

    2. PQS

      Yes. I’ve wondered for a while where is the “left wing” think tank apparatus? Paging liberal money: THIS is what you need to do. Set up your own “Heritage/Cato/Focus” Institute to spread The Other Side of the Arguments.

      1. Albertson

        This is not a left right dynamic. These folks are serious about social transformation on a global scale. It may appear that their agenda is consistent with a progressive worldview but if you look closer it goes far beyond the pet issues of the progressives. Corporatism, globalization, technocracy are just a few of the themes that underpin the objectives of these so called philanthropists.

        1. PQS

          Exactly my point. For every fake progressive think tank that is actually promoting “Corporatism, globalization, technocracy”, there should be another promoting real progressive goals. There aren’t many, that I can see.

  15. J. Powers

    Dedicating resources to work solving serious problems over the long term, without needing or wanting to make a profit by it, is something vastly philanthropists, working alone, can do better than almost anyone else. But that’s not charity, in the sense of easing the personal costs of poverty. Religious discussions of charity revolve almost entirely around the social fact of poverty (along with its direct consequences, such as lack of access to education and medical care).

    The conflation of non-profit social entrepreneurship and poverty amelioration is one of the most consequential aspects of Anglo philanthropy. Carnegie’s comments on giving, which claim that the most valuable gift is the rich man’s time and competence, derive directly from a belief that money signals personal moral value (rich people are rich because God favors them), and orient giving according to a view of money as a driver of positive social change through the financing of productive action.

    In other words, the noblesse are obliged not simply to ameliorate the effects of poverty, but to drive social progress. The perception that commercial entrepreneurship (which meets an as-yet unmet economic demand) and social entrepreneurship (which meets an as-yet social need) require similar resources and deploy them similarly reflects precisely this uniquely Anglo blend of Christian charity and Enlightenment can-do spirit.

    The main failure mode of this code of philanthropy lies in its substitution of long-term social benefits for immediate poverty amelioration: philanthropists are called on to identify and solve pernicious social problems rather than simply to help other people. It’s easy to see how intelligent people can be seduced by the prospect of solving problems, but what exactly counts as a “problem” and what counts as a “solution” (think: law of unintended consequences)? Aren’t highways and automobiles a “solution” to the “problem” of limited personal mobility? Weren’t subprime mortgages a “solution” to the “problem” of limited homeownership? Feeding people who are hungry, providing medical care to people who are sick, paying teachers to educate poor children… these have their complications, but there’s no absurd faith placed in the giver to solve society’s problems.

  16. mondo

    Aid and investment in Africa is a useful sink for our over-printed fiat currency. Its better than Gates/Buffet buying up as much real estate as they can and turning us all into true serfs.

  17. PQS

    Great comments, and fantastic topic.

    Yet I have to ask, even as I respect the Gates Foundation and Buffett’s honesty regarding issues like tax policy, where is the action from either of them for the country that grew, educated, and nurtured them and their wealth?

    You can argue, as I’m sure Gates would, that problems in America are paltry compared to those of Africa, and more expensive to fix than a nearly free polio vaccine. This is true.

    But what about the battle for health care reform? I wondered all through last year where the big companies were on this. Where is Microsoft? Where is Boeing? (We all know where Wal Mart is on the subject.) It seemed to me that even a slight bit of leadership from America’s Business Community might have tipped the entire conversation over to a model that is workable, sustainable, and, in the long run, better for America and its workers, specifically, Medicare for All, as an ultimate goal.

    Yet I heard nothing from Big Business on this, other than scaremongering from the CofC about how any tiny change will Ruin America. Why is this? Loyalty to other Big Business? Desire to control workers? Belief in “free markets” (even when paying through the nose for ever-more expensive “services” and then taking a tax break? Really?) I found the whole thing mystifying, since it seemed like such a no-brainer. Medicare for All is cheaper and more efficient. Aren’t those the twin values of modern capitalism? Wouldn’t it be in Business’ best interest to foster competition and level the playing field with the rest of the world?

    It seems to me that a push in that direction would have been more effective, have a more lasting value, and ultimately provide a much, much greater legacy for both Gates and Buffett than throwing money at problems that, it could be argued, are exacerbated by larger geopolitical realities that no amount of charity can fix.

    1. Psychoanalystus

      “But what about the battle for health care reform? I wondered all through last year where the big companies were on this. Where is Microsoft? Where is Boeing?”

      I’ve wondered about that myself. I suspect the reason is that they all share a common ideological belief in “screw the little guy”, even above profits.

      Psychoanalystus

    2. readerOfTeaLeaves

      Where is Microsoft on health care?
      IIRC, a 501(c)3 in the US is **precluded** from politically partisan activities, which means that the Gates Fdn would risk its tax status if it were to engage in a partisan issue.

      Where is Microsoft on health care? Like other employers, from what I’ve heard, they’re frustrated. However, a former King County exec (Ron Sims), now in Obama’s admin, formed a Task Force on health care some years back: AT&T, Boeing, and Microsoft all joined in, along with Univ of Washington public health experts and Group Health (medical co-op) experts.

      The result?
      A health care option for employees that builds in ‘health incentives’ to the cost structure; still want to smoke and carry too much weight and never go for a walk? You’re Tier 3. Want to quite smoking and lose som eweight? Your health care costs come down, because it lowers your premium.

      That is a public-private initiative, and because DC is horrendously screwed up, all of Sen Maria Cantwell’s expertise was squandered by Max Baucus. But I digress…

      Fundamentally, I agree with Yves’ comments elsewhere here that Microsoft (and Gates’) wealth stems from rent collection on sub-optimal products. I also agree — wholeheartedly! — that there is too much concentrated wealth in this nation, the tax laws are a mess, and we need to change our rules.

      But with that said, given current laws and wealth concentration, not every philanthropist is a jerk, and not every problem can be solved by corporations.

      The fundamental problem is that too much ‘wealth’ has concentrated in too few hands, and our social fabric is terribly strained. Anything that addresses the core problem of social dysfunction is IMVHO a good idea; ‘entreprenurial philanthropy at this point is about the best idea that some people can come up with, given their personal resources.

      (There’s a focus on technology because so many people with wealth come from tech backgrounds; that doesn’t make it an Evil Conspiracy, it’s what they know, so that’s what they do…)

      As for attacking problems in Africa; that comes from a growing realization that ‘unless everyone’s safer, no one is safer’. A plane from Seattle can be in London in less than 10 hours; anyone transferring to Africa can be there within 24 hours of leaving Seattle.

      People who are interested in biology and life sciences know that illnesses and diseases travel; hence, you have to address the fact that given modern transportation patterns, we have to address illnesses where they originate.

      I don’t care to get malaria because my neighbor just got back from Ghana and the same mosquito that bit her, then bit me. It’s happened.

      Sometimes, people actually do have decent motives.

      Doesn’t mean they deserve a completely free pass, nor that we should keep our rotten tax laws. But sometimes, people actually do have motives that are honorable.
      Saying that does not make me Pollyanna.
      Simply an observation.

      1. readerOfTeaLeaves

        Gack!! This: That is a public-private initiative, and because DC is horrendously screwed up, all of Sen Maria Cantwell’s expertise was squandered by Max Baucus. But I digress… should have explained that Sen Maria Cantwell (Dem, WA) knows a lot about the Tiered health services system that came out of the Ron Sims task force.

        She attempted to get it into the federal level, but Baucus and his healthCo allies obviously didn’t cotton to the concept of linking health care premiums to ‘healthy behaviors’. So much of Cantwell’s incredibly valuable expertise was lost.

        As for Bill Gates, he has a long time interest in molecular biology. Hence, his interest in vaccines and related technologies. In addition, if you want to bring down birth rates, you need to improve child survival; hence, an emphasis on maternal and child health.

  18. felicity

    Clever. Not satisfied with taking the heat off themselves for the sorry state of our economy by demonizing illegals (or liberals or unions) now the mega-rich have launched a campaign to convince the other 98% of us that the rich only have our best interest at heart.

    (Gates lobbied Congress to get visa requirements for foreign tech workers changed – so he had a bigger pool from which to hire. Did he do it because of concern for the plight of foreign tech workers. He did it because he has to pay American tech workers about 11 grand more a year than their foreign counterparts. How do we think he became mega-rich?)

  19. mg

    How dare we question the motivation and intent of the uber-wealthy? The monopolies and legislative ledgermain necessary to produce this wealth is a clear indication of their ability to rightly decide what is necessary for society’s ills. Regardless of the higher prices and lost opportunities experienced by those they now seek to help after so effectively harming, let us just be thankful they now seek to use their vast resources to create a better world.

    I mean really, they have proven how worthy they are by the simple demonstration of accumulating a depreciating currency. It is magical in form and thought.

  20. i on the ball patriot

    PHILANTHROCONJOB

    “Philanthrocapitalism”, coined by Matthew Bishop and Michael Green, is in reality a “Philanthroconjob”.

    It is just another deceptofatzi hijacking of the language, like; ‘free markets’, ‘capitalism’, ‘free trade’, etc., none of which exist anywhere on the planet.

    Deceptofatzi butt boy collaborators, Matthew Bishop (US Business Editor of The Economist), and Michael Green (“An economist by training, as a graduate of the University of Oxford, Michael taught economics at Warsaw University in the early 1990s under a Soros-funded programme. During his time in Poland, Michael was also a freelance journalist working for, among others, Polish Radio and the Economist.”) are simply singing the rich man’s praises for their daily crumb supply.

    http://www.philanthrocapitalism.net/about/about-the-authors/michael-green/

    And who owns the Economist?

    “The publication belongs to The Economist Group, half of which is owned by the Financial Times, a subsidiary of Pearson PLC. A group of independent shareholders, including many members of the staff and the Rothschild banking family of England,[8] owns the rest. A board of trustees formally appoints the editor, who cannot be removed without its permission. In addition, about two-thirds of the seventy-five staff journalists are based in London, despite the global emphasis.[9]”

    http://en.wikipedia.org/wiki/The_Economist

    Why the PR sell job now?

    For many of the good reasons stated in the comments above, but also because the wealthy ruling elite have been reading blog comments from around the globe and can see the building anger and resentment as their gangster machinations are being exposed daily. In short they are running scared.

    They don’t want to end up like Mussolini hanging on a lamp post.

    Keep hammering! And consider those election boycotts!

    Deception is the strongest political force on the planet.

  21. Hugh

    I wrote about this yesterday. The billionaires commit only to giving away 1/2 their wealth in their life times. This would leave all of them billionaires. If say they had a fortune of $5 billion and gave away 99% of it, they would still have $50 million, not hyper rich but rich, and far richer than most of us will ever be. So when we are talking amounts, we have to keep in mind how inconsequential to their wealth and life style this commitment is.

    The second point is that this is about control. The rich have bought the government, bought the tax laws. In the process, they took great wealth and multiplied it many, many times over. This hyper wealth in straight economic terms represents and inefficient and unproductive allocation of resources. It is also a highly undemocratic one. Under a less corrupt tax structure most of this wealth would have flowed back to the government and through it to ordinary Americans. As it is, it is the hyper rich who are calling the shots, making the decisions that otherwise representative government would make. And why not? As our corrupt system is set up now, funneling money back to the government would simply result in its being looted by their slightly less wealthy brethren. So why not make a big, if mostly PR, splash, look generous in the press, and above all keep control of all that money in the process. Yes, Virginia, this is nothing more than a scam.

  22. dave

    So we know if they give the money to government it will probably go to wall street bailouts, foreign wars, or corruption. So instead people try to spend their money on things that will actually help people. And you don’t like this Yves?

    No pleasing you I suppose.

    1. Yves Smith Post author

      Did anything in this post mention giving more to government, or government at all? This is strictly your pet issue that you project on to me.

      As far as the relationship between wealth and policies that favor the rich are concerned, you have the causality backwards. Yes, the rich have always had disproportionate influence over policy, but as those at the top have gotten even richer, they’ve invested in and have had even more success in pushing through policies that favor their interests. They’ve now created a vicious circle (read Jamie Galbraith’s The Predator State for more details).

      It will take a long time to undo this, and we’ll probably have to have another crisis for this pattern to be broken, but more progressive taxes would be a start (which BTW does not have to result in bigger government, merely changes how much various income strata pay for it).

      1. Richfam

        Dispite being an evil, rent seeking capitalist I agree with this. There is absolutely a level of wealth that creates control, and a monopoly of power that limits the ability for a capitalist system to persist. That’s why I’m all for a very high estate tax but with a high lower boundary ( I’ll leave to the wise elders to determine this boundary). Meaning higher than $10 million sounds like a start. Don’t ask me what the right number is but at some level of wealth you’re in the business of hindering everyone else from getting wealthy, bad billionaire. You need to be careful about how you deal with this so as not to kill the dream of wealth.

      2. dave

        Yves,

        What exactly do you want rich people to do with their money?

        If they give it to charity they are apparently hypocritical con-jobbers trying to make us all like them when we should hate them just for being rich.

        If they take a personal interest in making sure their charity actually goes to help people in a meaningful way instead of blindly giving it away with no accountability for whether it helps anyone then apparently they are controlling egotists.

        I mean what do you want Bill Gates to do with his money?

        I think he did the best possible thing he could do. If he gave it to a generic private charity a lot would have been skimmed and it wouldn’t have actually alleviated poverty in any more then a temporary manner. Is that somehow more just then trying to form a charity that tries to alleviate poverty in a more permanent and meaningful manner?

        Why is it selfish if a person takes a personal interest in the project. Can people not try to do social good with their talents?

        Bill Gates had the option to give his wealth to an unaffiliated private charity or write a check to the IRS and let our government try to find solutions to our social problems. He made a judgment that neither of those entities would do as much social good as his forming his own charity and directing its investments. I think he’s right. You either think he’s wrong or just want to rag on his because you can’t fathom the upper class ever doing anything nice for anyone and don’t want him to get the credit.

        1. Yves Smith Post author

          Dave,

          First, you appear to assume I am a member of the great unwashed, jealous of my betters, with no understanding of the rich. I’m as old Yankee as you can be, I have at least seven ancestors (one branch of my family is disputed, so it might be as many as eleven) who came over on the Mayflower. And I’ve worked extensively on Wall Street and have had 5 billionaires as clients, plus some other wealthy clients at close to that level. So I am pretty confident I have a much better understanding of this terrain than you do.

          Second, on the subject of Bill Gates, I suggest you look at the comments on rent seeking above. While some uber wealthy have won their success reasonably fairly, you should consider the Mario Puzo line about great wealth being the result of great crimes. Gates is a classic monopolist who has long managed to sell inferior technology at an excessive price. He’s been anti-progress on the technology front, it has been a very profitable strategy for him. Langley raises the question in his original post which I quoted and you ignored:

          “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…”

          And where in the post did I say anything about higher taxes? Yet it’s funny you attack them, when Gates HIMSELF has advocated higher taxes on the rich! And since you brought taxes up, did you forget that most big corps pay an effective tax rate of about 10%?

          You seem to miss the key issue. Giving money to those less fortunate is a good thing. I am questioning HOW Gates et al are doing it and you appear unable to recognize that.

          If you are suspicious of government (and government was NEVER MENTIONED in this post, this is again your bizarre projection, but I’ll deal with your pet obsession since you brought it up), I think you ought to be worried about the power concentration particularly if (as was presumably they hoped) some of these uber wealthy gave, as Buffett has, to the Gates foundation. Do you want a not for profit of that scale, accountable to only its backers, taking a quasi governmental role? I am leery of concentrations of power, and this looks uncomfortably like a further extension of power by people who are already extremely powerful.

          Wealthy people in the past typically gave money quietly, sometimes even anonymously, and didn’t seek to achieve big results but were modest abut what could be achieved, because complex systems are intertial and it is hard to know what side effects might result from aggressive intervention.

          1. dave

            Yves,

            Congrats on being born to a good family and being well off. I’m going to go out on a limb and say you aren’t a billionaire. Clearly, you don’t think society should have many billionaires and you think most of them got there by cheating. I will further go ahead and assume you believe that progressive taxes on these people should be much higher so that becoming a billionaire is nearly an impossible task. Wrong on any of that?

            So we have billionaires. And when some of them give to charity it makes billionaires look good. And if people feel empathy for billionaires then maybe they won’t support your campaign for higher taxes on billionaires, so we get a post with a menacing title like “Should We Be Leery of the Generosity of the Uber-Rich?” It’s got all the honesty of Glen Beck stating, “I’m just asking questions.”

            I’d like it if government could solve of social problems. It hasn’t however, and I don’t believe its due to lack of funds. So I don’t think taxing these people more does the job (I actually support higher taxes on billionaires, but only to cut taxes on working people, not to increase the budget with new social programs). The thing is, Bill Gates and Warren Buffet agree with me. The IRS accepts checks above your legal tax burden. Both of them could have given more money straight to the IRS if the government could do a better job. They talk about higher taxes, but when they have to put their money where their mouth is they both know they can do a better job then handing it over to the treasury.

            On to your main questions:
            “I am questioning HOW Gates et al are doing it and you appear unable to recognize that.

            Do you want a not for profit of that scale, unaccountable to only its founders, taking a quasi governmental role?”

            I don’t have a problem with people starting large philanthropic organizations and trying to hold them to account. After all, what are the two alternatives to try and help the world.”

            1) Giving money to a private charity and then being hands off and not holding it to account.

            2) Giving money to government to try and solve social problems.

            Well, private charities are about as accountable to their boards as CEOs are accountable to theirs. I.E. not much. My uncle was in the charity fund raising business and as he put it private charity is largely a mixture of corruption and incompetence, with some good getting done but far far less then is possible given the money coming in.

            Government is accountable to no one. Sure, we have “elections” but we both now they are mostly bullshit and nothing changes.

            So why should they use their money to start charities and then actually make sure they do some good with that money by holding them accountable? What is wrong with that? I applaud these people for taking the time and effort to make sure their money does some good for the world instead of just writing a check so they can feel good about themselves and going back to their lives.

          2. Yves Smith Post author

            David,

            First, I suggest you read this, supplied by a David earlier on this thread, on the matter of Gates and the impact of his charity:

            http://harpers.org/archive/2009/06/0082533

            Second, there is a great deal of straw manning in your argument, as well as inaccuracies. Government not accountable? That’s laughable. It is accountable, very much so….to those who pay for it. Read Tom Ferguson’s Golden Rule (and he meticuloulsy tracks campaign donaation data, he has the goods).

            You peculiarly take up the case of the uber rich, yet decry global wars, bailouts, which are the policies that government paid for by monied interests got us. You don’t like the outcome, yet you defend a big element of the system that got us here, and seem pathologically unable to see the contradiction in your position (well you mention Glenn Beck as an authority, that tells a lot about where you are coming from).

            It may be hard for you to grasp, but a world with more billionaires, as in a highly unequal society, is bad for them and us. You can look at Latin America, or Russia now, or consult the data. Lifespans among the richest, adjusted for demographics, are LOWER in unequal societies than in more equal ones. It’s due to the isolation (living in gated compounds with bodyguards in the extreme version exerts a toll) and weaker social bonds that result. Every social indicator of well being, such as crime, education levels, divorce rates, are worse in highly unequal societies. The data is unequivocal.

            In case you missed it, we’ve had a massive shift to a more unequal society, the result of changes in tax policy and what is considered socially acceptable. The average CEO made 48 times average worker pay in 1980. In 2008 (remember, the depth of the crisis, 2009 is certain to be more extreme), they made 318 time average worker pay. Can you tell me with a straight face that the typical CEO is relatively more than 6 times better than the average 1980 CEO? Bullshit. This change isn’t about merit, even though you, a likely non-beneficiary, seem desperately want to believe It (which is ironic, I’ve at least fed indirectly at the trough).

            In addition, the definitive study of top performing companies, Jim Collins’ Good to Great ((in which he points out he was trying to exclude CEO behavior from the equation, but his team found it to be so important they insisted he include it), the best performing companies had modest CEOs, not very well paid, who took credit for mistakes and attributed success to their team, not them. And the record similarly shows that high pay among CEOs is correlated with underperformance.

          3. Doug Terpstra

            Dave, your statement is muddled, perhaps purposely: “I’d like it if government could solve of [?] social problems. It hasn’t however, and I don’t believe its due to lack of funds.”

            Did you mean gov’t can’t solve ALL, SOME, or ANY social problems? There are reams of readily available refutation including worker safety and child labor in the industrial revolution, to the [partial] abolition of slavery, women’s suffrage, civil rights, union rights, truth in lending/advertising, Miranda rights, anti-trust, etc., etc., and so on and so forth …

            Your quip is the old “you can’t throw money at it” and “a mind is a terrible thing to waste [tax dollars on]” —the wing nut excuse for “starving government until you can crown it in a bath tub”—typically dismissive nonsense that so often goes unchallenged to ensure that we do not restore effective progressive taxation. Sure, in its current state, government by overt and covert bribery cannot work, and Reagan-Bush-Clinton-Obama administrations prove it, but when we finally end the banana-republic process of legislation through bribery, then well-funded government will undoubtedly be able to effect positive change far beyond the lame attempts of billionaires to buy redemption through voluntary indulgences.

          4. dave

            Yves,

            Thanks for making a post that addressed none of what I said.

            Let go one by one through your points.

            1) Government is not accountable to the people. You presumably agree with this, even though that’s EXACTLY what I said in my post yet you try to disagree by stating the exact same thing I have back at me. Hence, given this situation we can’t count on it to come up with solutions to the peoples problems. So paying more in taxes won’t solve the problem.

            2) I’m taking up the case that the uber-rich should be able to donate to charity and take an active interest in making sure the money they donate actually does some good. You would prefer they pay that money to government in taxes or give to unaffiliated private charities without any accountability. I’ve explained why your two ideas are worse then what they have done. I’ve used what government has done with the money it has as an example of how these people paying higher taxes isn’t necessarily going to do any good for the world.

            3) My argument with Glen Beck is a direct comparison saying that your post is just like the kind of thing you hear from Glen Beck. Your post is in the form of a question, but its not really a question at all. “Should We Be Leery of the Generosity of the Uber-Rich?” The subtitle is obvious: Of course not, the uber-rich are evil and if they give to charity there must be some sinister purpose. So while I was saying you were like Glen Beck (thus dragging you down), you thought it meant Glen Beck was like you (thus dragging him up). What an ego you have.

            The rest of your post has to do with inequality, which has nothing to do with the matter at hand. These people have gotten rich. Maybe you don’t think they should have, but they did. They now have to decide what to do with that money. Some of them are actually trying to make the world a better place, and your indignant about it because they won’t do it the way you want them too, even if the way they are doing it might actually be better. You see their trying to help society as a threat to your class warfare objectives, so you actually attack it. Sad.

            As for feeding at the trough you got one thing right. I quit my Wall Street job early on before I got rich because I thought it was immoral to make money in that manner. You were just fine getting rich first before finding a conscious. And now because your merely rich and stopped short of uber-rich we are supposed to see you as a moral authority? Doesn’t work like that I’m afraid.

          5. anonny

            Dave,

            You are intellectually dishonest. You raise a bunch of issues unrelated to the post, Yves points that out but nonetheless deals with some of them, you insist on dragging the discussion further o/t, dismiss her responses as unrelated (income disparity) when they are on point, and then compare her to Beck.

            Yves, if you see this, you have my vote for banning him. He is negative value added and way way outta line.

    2. DownSouth

      dave,

      You ask: “So instead people try to spend their money on things that will actually help people. And you don’t like this Yves?”

      But that’s a loaded question, with a built-in assumption. You assume that Gates and Buffett are trying “to spend their money on things that will actually help people.” But is that assumption true? It’s entirely possible that it is not, and helping people isn’t the goal at all. And yet you proclaim it as if it were sure truth.

      Calling your assumption into question is an economic theory called Costly Signaling Theory:

      Costly signaling theory provides the basis for arguing that generosity—-incurring the costs of providing collective goods—-is one means by which individuals and coalitions compete for status, and ultimately for the material and fitness-enhancing correlates of status (such as political power, mates, and economic resources)… If this explanation is correct, it means that those who engage in acts of unconditional generosity by providing collective goods are not acting in hope of reciprocation in kind, nor sacrificing for the good of the group…, but rather are competing for status and its perquisites.
      –Eric A. Smith and Rebecca Bliege Bird, “Costly Signaling and Cooperative Behavior”

      The bottom line is that you are incredibly gullible and naïve to take these guys at their word. Red flags are flying up everywhere, but none of them penetrates your paradise of innocence.

      1. dave

        While your argument could be true, it could apply to pretty much any charitable action by anyone. This is also true of decision makers at private charities and of government officials. So what exactly are you getting at?

        We could question their motivations all day, but I think we can agree its better they gave to charity and its a good thing they are taking an interest in it being used well.

        1. DownSouth

          But all your arguments depend on the same assumption, including this one where you conclude “they are taking an interest in it being used well.”

          It’s quite obvious that no amount of evidence will disabuse you of that assumption, so I don’t see why anyone would waste any more time trying.

          1. dave

            If a person has a choice between giving their money away to another party to make the decisions or making those decisions themselves then we have to compare the relative virtues of the two decision makers. Charity administrators are just as likely to be biased, greedy, incompetent, or showboatish as donators. I think, on the whole, those that make an effort to make sure their donation is spent wisely rather then handing it over with no strings is more likely to improve outcomes from their donations.

        2. Doug Terpstra

          There is arguably greater reward and good done in giving discreetly, as most mortals do, though it could be said that the same may not be possible for tycoons of such stature.

          I think DownSouth’s insight into possible motives are illuminating. Although I’ve largely abandoned the catechism of my youth, there’s undeniable wisdom in certain red-letter scriptures:

          “Be careful not to do your ‘acts of righteousness’ before men, to be seen by them. If you do, you will have no reward from your Father in heaven.”

          “So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by men. I tell you the truth, they have received their reward in full. But when you give to the needy, do not let your left hand know what your right hand is doing, so that your giving may be in secret. Then your Father, who sees what is done in secret, will reward you.” (Jesus in Matthew 6:1-3)

  23. Richfam

    Question for the red masses – what’s the alternative? A few possibilities: taxes, state takes control (very Chavez), state determines the profit margin, state controls the charity, some sort of surgical eminent domain on bill gates brain ( my personal fav), how about we force invitro all potential moms with bill gate’s stuff so we’re all smarter and richer (sorry), control the butterfly population so that we are all equally lucky (I know that’s funny)… There’s some smart Eco 401 people here, help out!

    1. Yves Smith Post author

      Funny how the obvious answer, more progressive taxes, escapes you. And note US tax burdens overall are far more regressive than the picture you get by looking at Federal income taxes.

      1. Richfam

        First thing I said was taxes! Sorry about the bill gates “stuff” comment but I know you’re planning a post on butterfly herding right now. :)

        1. Yves Smith Post author

          Yeah, but that came off as a throwaway, the rest was a pretty frontal and dismissive line of argument.

      2. Psychoanalystus

        Yves,

        There may be a literacy barrier here, as the term “progressive taxes” may be to complex to understand for him, especially since he has admitted below not having read your book. After all, he’s a “rent-seeking capitalist”, meaning he likely owns a small duplex in Florida (duplex which lost 75% of value during the past 3 years), and collects $400 a month rent from his Section 8 welfare tenant..LOL

        Nonetheless, I thought perhaps you may consider explaining the term “progressive taxes” in simpler language that he may understand. Also, to minimize further confusion on his behalf, I suggest you emulate his writing style (i.e., poor grammar, and lots and lots of spelling errors)…LOL

        Psychoanalystus

    2. Psychoanalystus

      @Richfam: “some sort of surgical eminent domain on bill gates brain ( my personal fav), how about we force invitro all potential moms with bill gate’s stuff so we’re all smarter and richer”

      Hahaha! Yeah, let’s let this Gates college dropout “genius” who can’t debug his software find a cure for malaria, right? I’m sure he has the brainpower to do that.

      Thanks for the laughs, Richfarm… you’re the best…lol

      Psychoanalystus

      1. Richfam

        Thanks, it feels much better than my occasional rants on Yves’ crazy ideas. Yves, I promise to read your book…sorry.

        1. anonny

          On the Gandhi “first they ignore you, then they ridicule you..” timeline, looks like we are only at the ridicule stage. I had hoped we were further along.

    3. DownSouth

      Red masses?

      Oh geez, give me a break.

      Who do we have here, the latest McCarthy wannabe?

  24. Kid Dynamite

    despite my greatest desires to not get involved in this comment thread, I simply can’t help it.

    Yves, although you tried to skirt the issue with Dave above, you admitted to RichFam that the “obvious” answer was more progressive (higher) taxes. (your quote: “Funny how the obvious answer, more progressive taxes, escaped you)

    now – my question is simply this: doesn’t the solution of confiscating wealth via higher taxes necessarily imply that the government could do more good with the money than the Charitable ventures can? I would STRENUOUSLY disagree with that assertion, and I think it’s what Dave was trying to say above.

    1. Psychoanalystus

      No offense, Kid Dynamite, but a progressive tax does not mean a higher tax.

      Do your homework, kid. You know, to avoid making the rich look uninformed… YOU are rich, now aren’t you?…LOL

      Psychoanalystus

      1. Kid Dynamite

        Psychoanalystus – we’re trying to have an intelligent discussion here, and I’m asking very simple and pointed questions, in an effort to not have them skirted or replied to with nonsense, yet for some reason you’re still trying to get in the way with nonsense. Are you now alleging that a more progressive tax system wouldn’t result in the uber-wealthy paying more notional dollars in taxes? NO – of course you’re not, that would be crazy, and it would be wrong.

        The question/statement is simple: an advocated solution (by others in this thread, including Yves Smith) is to make the uber-wealthy less wealthy in the first place by having them pay more taxes. SINCE they are choosing to give money away, advocating for the government to take that money instead necessarily assumes that the government can better allocate it. I believe that is false.

        1. Psychoanalystus

          Fact: Under a progressive tax system, the average tax rate is less than the marginal tax rate. Not necessarily for the uber-wealthy, but for the population at large.

          As far the uber-wealthy CHOOSING to give their money away toward phony charitable projects abroad, they may do so to their little hearts’ desire, but only AFTER they pay their taxes to the US, should they choose to maintain US citizenship.

          This government needs to build and maintain infrastructure, it needs to fight useless wars abroad, it needs to print social security checks every month, it needs to build schools and prisons, and above all, it needs to bail out various loser TBTF corporations. Thus it needs to collect taxes. However, should the uber-rich be opposed to such activities, they are more than welcome to move to Somalia… I’m sure the pirates would be more cooperative in allowing them to keep their money…LOL

          Psychoanalystus

  25. Kid Dynamite

    related tangent: since I know you have some Chartalists on staff, and they’ve taught us all that the Government doesn’t actually NEED to collect Gates’ money via taxation in order to spend it – would you be happy if Gates simply took his charitable funds, converted them to cash, and lit them on fire instead of working on his charitable endeavors?

    That would have the same effect as taxation – the money would be removed from the system, and the government could just create more and spend it on whatever they wanted.

    Where are you Marshall, Ed, am I wrong on this?

        1. Psychoanalystus

          Yeah! I’ll do that right away, Kid Dynamite… But not before I’m done spending these cash vouchers I just got from the government for being such a good kid myself…

          Get it, kid?

          Psychoanalystus…(ROF,L)

  26. Jessica6

    I think Oscar Wilde expressed what I’ve always sensed about charity over 100 years ago:

    ..their remedies do not cure the disease: they merely prolong it. Indeed, their remedies are part of the disease.

    They try to solve the problem of poverty, for instance, by keeping the poor alive; or, in the case of a very advanced school, by amusing the poor.

    But this is not a solution: it is an aggravation of the difficulty. The proper aim is to try and reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim. Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so, in the present state of things in England, the people who do most harm are the people who try to do most good; and at last we have had the spectacle of men who have really studied the problem and know the life – educated men who live in the East End – coming forward and imploring the community to restrain its altruistic impulses of charity, benevolence, and the like. They do so on the ground that such charity degrades and demoralises. They are perfectly right. Charity creates a multitude of sins.

  27. mg

    Kid Dynamite misses the obvious. The uber-wealthy should not have been allowed to accrete these billions in personal wealth. Any system that concentrates wealth in what is a relatively few hands is inherently corrupt. Taxing the resultant wealth is one of the steps necessary in rectifying this issue.

    Free market my over entitled ass.

    1. Kid Dynamite

      like everyone else, you ignored the question. are you or are you not saying that the government could allocate this money better than the charitable foundations do and do more good with it?

      i absolutely refuse to get into a debate with you about the merits of how this wealth was attained.

      1. mg

        I absolutely refuse to get into a debate with you regarding the difference of taxing or charitable dispersion of ill gotten gains.

        Now I sense you really want to argue about the difference between government or private control of capital, taxation and business regulation. Please assail me with your free market ideals, invisible hand nonsense, and whatever Ayn Rand or Milton Friedman quote you’d like to support your supposition that these wealthy deserve the right to disperse their riches based upon a lifetime experience of sucking the wealth from a once great nation.

        1. Kid Dynamite

          “I absolutely refuse to get into a debate with you regarding the difference of taxing or charitable dispersion of ill gotten gains”

          hey – if you want to ignore the question, that’s your prerogative. but please don’t try to distract from the fact that you’re ignoring the question by bringing up other extraneous issues and ranting about Ayn Rand. I’m pretty sure I haven’t quoted Rand, Friedman, Adam Smith, or anyone else in this thread. I asked a very simple question. I’m not surprised that you don’t want to answer it, because to answer it would be to put you in a seemingly untenable position.

          I guess you think that the government can allocate funds as well as private markets and charities. Fine. Your prerogative. I strenuously disagree, and I think when it comes to charity/welfare, it’s not a very tough argument.

          1. i on the ball patriot

            Kid Dynamite says — “i absolutely refuse to get into a debate with you about the merits of how this wealth was attained.”

            If that wealth was achieved by; buying, controlling, and corrupting government — WHICH IT WAS — then THAT government would not do a better job of distributing the stolen wealth.

            Discussing the merits of how the wealth was attained then is instrumental to the debate and especially the question you pose about an alternative distribution by government.

            Deception is the strongest political force on the planet.

      2. EmilianoZ

        The question of whether the government can allocate this potential money productively is of course very pertinent. Government is capable of tremendous waste, especially one as corrupt as ours.

        I have following proposition to make (to be enshrined in law): if the rich are to be taxed at a higher rate, the proceeds can only go to:
        1) Infrastructure works (70%)
        2) Start-ups (30%)
        An independent non-governmental panel of recognized experts (possibly popularly elected) will decide which projects deserve funding.

      3. Psychoanalystus

        Kiddo: what are we talking about here as far as charitable expenditures by these “soft-hearted” uber-wealthy? 50 billion? 100 billion? Now, how much larger is the US government’s budget than that? 100 billion is peanuts, Kiddo — you can’t even do a decent AIG bailout with that kind of cash nowadays, leave alone fight a useless war in the Middle East. Besides, I hear they set up their charities primarily abroad, which does us no good here.

        No, my friend. We need to have these people contribute to THIS country’s tax system.

        Psychoanalystus

  28. tar, etc.

    “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…”–

    That’s how I feel about it, too. I don’t want their “charity” which amounts to another aspect of our society being privatized. Top tax rates used to be around 95%, which suggested a social norm that ball players, for example, shouldn’t be paid tens of millions a year. Maybe anyone pulling in millions and billions should have a confiscatory rate applied to their megalomania.

    We defend a person’s right to get rich, but surely there is a logical limit on the individual’s pursuit of wealth and the good that brings to society. At some point – and we are in Robber Baron territory already – concentration of wealth in the hands of the few and the impoverishment of the many becomes destructive to society. See above: if the rich really want to practice charity, and not just create a new form of monopoly, they should normalize business ethics that would enrich society as a whole.

  29. Michael Fiorilllo

    I’d like to suggest that we use the “malanthropy” to describe much of this activity: money given to undergird the personal or class interests of the giver.

    As a public school teacher, I see this process occurring at an accelerating pace: Gates, Eli Broad, the Walton’s, the Fishers, et. al. use their billions to buy policy, setting the terms of debate upon which decisions are made.

    They are now going even further, opportunistically using the fiscal crisis of states and localities to jam districts into accepting their policies – which invariably involve privatization of the schools, neutralizing or breaking the teacher’s unions, and taking control of the social engineering aspects of education- at a time when the districts are starved for resources.

    As for alternatives, I’d recommend we bring start by bringing back the tax rates in effect under that old Bolshevik, Dwight D. Eisenhower.

  30. Siggy

    Ike the Bolshevik? The confiscatory tax rates of his administration? Why not? We have a lot to pay for. How shall we do it? Will increased taxes suffice? I think not. Will debasement suffice? Not as easy as it once was in the 1960s. What to do? Do both, tax and debase.

    That’s what we’ll do and note that helicopter Ben is firmly committed to doing his part. Fear not that we might run out of ink, after all there are all those lovely little electronic 1s and 0s. Those gaddabout little beauties that flit and flutter about at light speed. Those delightful electronic pulses that presage incoming market orders that can be read and which can used to front run for a few pennies a share.

    Why are we worrying about old Buffett and his goombah Gates. There are serious fish to fry. We need committes to select committees to adjudicate the appropriate level of riches that any one person or party may amass. And oh by the way failure is not an option. So, as to the question regarding generosity: Yes, we should be leery of the Generosity of the Uber-Rich.

    Money is the engine of absolute power; and as we all may recall, ‘absolute power corrupts absolutely’.

    I’ll take Ike over Obama period even with Sherman Adams and his affair with fine vicuna coats. And from that era how about Wilbur Mills cavorting in the fountain?

    Oh dear dear Al Cap, would that you could return we need some schmoos and some good old ranting from Jubilation T Cornpone. We need something that will restore common sense.

  31. prostratedragon

    One must sort through the writing of Paul of Tarsus, for he was not a modern man. But this he nailed:

    “1 Though I speak with the tongues of men and of angels, and have not love, I am become as sounding brass, or a tinkling cymbal. 2 And though I have the gift of prophecy, and understand all mysteries, and all knowledge; and though I have all faith, so that I could remove mountains, and have not love, I am nothing. 3 And though I bestow all my goods to feed the poor, and though I give my body to be burned, and have not love, it profiteth me nothing.”

    (Some say agape or charity for love.)

  32. kristiina

    Intersting topic, and even more interesting is, how the discussion has turned out to be.

    What i have been thinking about lately, is what utility the piling of those 1′s and 0′s into some filing system, be it stock, gold or whatever other store or safe haven a rich person can, with his/her “people” imagine? To what avail do they keep collecting, on and on, beyond any conceivable need of self or family down to how many generations?

    It is as if there was some genetic/hardwired feature in some people that money is equal to value, accurately and objectively. So the more money, the more valuable you are as a human being. The problem is that those who do not have this hardwired feature have a tremendously hard time to understand this money-collecting compulsion. This may be behind the difficulty in constructing taxation systems that would prevent hthis kind of phenomena from occurring.

    To what avail do they keep collecting? Maybe it is competitiveness. As in the sauna competition: people risk their lives (and die) just to win, for the sake of being the winner. So the rich just keep running to get richer to be winners, not because there’s anything to gain anymore.

    The point made above about the rich buying social status through charities sounds like something a competitive person would feel a calling for when there’s enough mansions, cars and art collections to make spending feel a bit boring. One can buy oneself moral standing, it seems. Many commentors seem to find it blasphemuos to question the motivation of anyone who gives to a cause deemed “good”, like health and education. Putting money in “good” cause is good, the action (and money spent) is sufficient proof of goodness – to some.

    I am thinking would there be an aspect of compensation in the interest in do-goodism? Knowing one’s way of collecting the riches has not been really socially beneficial, putting some part of the gains into repairs and buying oneself a clean consciense and moral standing in society to boot?

    I think it is Dalai Lama wha has said about this doing good, wanting to help good things to happen that it is not necessary. It is enough to stop harming. It seems to me that we western people as a society have been really pushing at being the winners, regadless of the price. Now we are even culturally infested with the impulse to compensate the ruthless extortion with good deeds. Stopping doing harm would mean we’d need to pay attention to what we are doing and what the potential harm would be at the point of doing it. Not just clening the mess afterwards, somehow, but having the werewithal to not making the mess in the first place.

  33. Psychoanalystus

    It appears that the message most of us here have sent to these “kind-hearted” uber-rich is this:

    “Keep your filthy money. We don’t need your phony charity. Just pay your freakin’ taxes, OK. Just pay your taxes!”

    Psychoanalystus

  34. bobh

    Some of these comments overstate the link between the business practices of obsessive wealth accumulators like Gates and Buffet and their subsequent desire to be philanthropists. Humans are complicated and have multiple sides to their personalities. A person like Gates can ruthlessly build and defend his monopoly and personal fortune and later decide to back off a little and do good with some of the money. The latter impulse can occur for many reasons and doesn’t necessarily or always come from the behavioral, ethical, and moral traits that built the fortune. Ideally, most of this money would be taxed away, to be spent wisely by an enlightened government to make a better world. In our imperfect world, Carnegie Libraries, Gates third-world malaria programs, etc. may be the best we can hope for from our capitalists. They are certainly better for the rest of us than more free market think tanks and business schools.

  35. Andrea

    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).

    One point:

    On the ground, locally so to speak (district, canton, part of a state, small country) there are always many ppl who know exactly what to do, with tried and true recipes that have worked elsewhere (ok cultural differences should be taken into account; unexpected outcomes have to be studied, etc.)

    Eliminating the worst effects of poverty, of drug use, of corrupt health services, of low performing education, of hooliganism, of low level corruption, and so on, and of curing malaria, tuberculosis, educating girls, and on and on, isn’t rocket science, nor, often, does it cost much.

    Particularly in basic ‘health’ and ‘education’. It is relatively cheap and easy – and today you don’t even need a good library or international meets. I am of course not touching on the question of political systems as a whole, which is another topic.

    The problem is rather resistance to simple measures by elite groups who for commercial and ideological and political reasons prefer the problem to fester, or not to tackle it for various reasons.

    Drugs in Afghanistan are a good example. The ‘Taliban’ after the Russkies left – religion and so on set aside – managed to cut the work force by about one third to half (Afgh. had the very best stats for female employment, better than Holland or Switz.) and slashed poppy fields not to eliminate drugs but to make prices rise and control the market. These are clearly political/control Mafia-type moves, and did nothing for the ‘people’ – Afgh. then met prostitution, AIDS, a huge drug industry, increasing poverty, food dependence, etc. The US has done nothing to reverse that trend, afaik.

    The poster boy counter ex. is Portugal that completely liberalised drug use of all kinds – with good success, I judge, but google will provide varied opinions.

    Malaria and tuberculosis (Gates’ faves I have read) are another ex. Gates and other seemingly big charity givers have removed money and authority from local, national and international bodies that try to use a global and best practices approach, and are ‘sorta‘ democratically organized. UN bodies such as WHO are now doubled up, or even in competition with, private foundations and agencies that have other interests at heart. (See swine flu for ex, what a disaster in management.) The health biz is huge, and there are various ways in.

    Hooliganism, e.g. in football stadiums, is another ex. Stopping it is a trivial, it’s a very local, minor problem, a 12 yr old can write prescriptions. But certain pols prefer hate, citizen on citizen violent action, so that they can run on a ‘security’ ticket while doing everything they can to fire up violence, spite, strife, nationalistic pride, while at the same time undermining law enforcement, underfunding the police, removing power from an independent judiciary, and so on. Sarkozy is a prime example here.

    So-called ‘social problems’ – a wide undefined swath to be sure – are often not that difficult to solve.

    Philanthropists used to give to acquire a gloss and acquire better status (arts, music, education), now the gifts are just part of ‘corporate creep’ – corporations branching out into new areas, taking on new controls, the fab in thing! (After outsourcing..) When health care of citizens is decided by….Gates or Monsanto…then what?

  36. Costard

    And this is why I, and many others, find modern liberalism so noxious. Your war against the individual leaves no earth untouched. Quicker to condemn virtue than vice, your compassion is the cheap kind found in dog kennels. Your every appeal to stereotype and class ideology is merely to say: you do not understand human beings. Of most of these people you know nothing, not their names, not the origin of their fortunes. You accord them the autonomy of animals, evidently failing to realize that this makes you an animal, too…

    The echo chamber here worries me. In fact, it is the only reason I come back. If you spun your narratives in isolation, it would be one thing; but hatred is a fire and fires tend to spread.

    Tear up your Marx, and approach the real world.

    1. Deus-DJ

      If you would prefer to live in a free-for-all, then by all means please move to luxemborg or somalia. We instead prefer to live in something called a society.

  37. Faith Hussey

    If there is a vicious cycle between government and business each enriching the other then why don’t we restrict our government and limit it’s power to “pick winners” or make deals with large corporations by reducing the size and influence of the said government ? It would be easier than trying to reduce the size of our uber wealthy’s wealth, but it would stop the “vicious cycle ” , no ?

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