openEconomy

How billionaires can help the world

The Giving Pledge promoted by Bill Gates and Warren Buffett is a huge commitment of funds by the super-rich to philanthropic ends. At its core is a view that business, however conducted, is just a means to an end, the source of money to be distributed to good causes by wealthy elites. Business leaders would do well to apply their zeal and skills to reforming the objectives and operations of their vast engines of wealth.
Lorenzo Fioramonti
23 August 2010

Forty of the richest individuals in the United States recently committed to returning the majority of their wealth to charitable causes. In order to ‘inspire’ people across the globe, they have established the Giving Pledge, a philanthropic initiative outlining the ambitions of this new generation of super-rich. Pioneered by Bill Gates and Warren Buffett, the Giving Pledge’s list of billionaires now includes – among others - eBay’s Jeff Skoll, New York mayor Michael Bloomberg, old money such as the Rockfellers, and media tycoon Ted Turner. The breaking news has travelled across the globe and stirred debate also in Europe, where philanthropic initiatives of this scale are unheard of. To all intents and purposes, the Giving Pledge looks like the most far-reaching philanthropic initiative of all time. Furthermore, it occurs amid the most destructive economic crisis after the Great Depression and so carries a powerful symbolic message: big capital can help make the world a better place for all.

But is it really so? In the past three decades, financial wealth has become increasingly concentrated in a few multinational corporations, some controlled by close-knit families or other elites. Income gaps between the very rich and everyone else have more than tripled and workers’ salaries have dropped in terms of purchasing power parity. State budgets have shrunk, mainly due to plummeting fiscal revenues, tax cuts for the richest, and tax avoidance on an industrial scale. In today’s world few if any major corporations do not use nested subsidiaries and tax-sheltered holding companies to, amongst other aims, fragment profits and thus reduce overall taxation. And very few (again, if any) billionaires abjure the use of offshore bank accounts. Harnessing the potential of globalization, most billionaires’ corporations have not refrained from relocating to countries where labour is cheaper (and sweat shops widespread), shedding thousands of jobs at home and blackmailing workers' unions. No doubt all these practices are legitimate, but they raise deep questions regarding the benevolent goals of big business and its overall impact on social justice. In general, big business operates in ways that exacerbate poverty and multiply injustices across the world.

If we recognize that big business is co-responsible for the state of our economies and social welfare, how can then the Giving Pledge address the injustices its supporters have contributed to creating? Philanthropy is a noble sentiment but it can at best scratch the surface of social problems. Often, unfortunately, it hides or even entrenches the structural injustices in our current economic and financial system: as long as you give something back – the philanthropy creed seems to imply - you can carry on with your life doing ‘business as usual’.

The Giving Pledge initiative expects philanthropic billionaires (or ‘philantrocapitalists’ as they like to call themselves) to devolve at least 50 per cent of their net wealth to charitable causes, but it leaves it up to them to decide how to disburse the money and whom to give it to. In this regard, it is a story of old wine in new bottles, given that most billionaires have long had their personal foundations. Except some spot cases, very little has been accomplished on a bigger scale.

In 2006, philosopher Peter Singer wrote in The New York Times that America's super-rich could and should give more to charity than they used to and invited them to contribute towards the Millennium Development Goals, the failing and under-resourced UN framework to address world poverty and other global injustices. The Giving Pledge looks like a tentative response to Singer's call, although it has dodged the question of coordination and complementarity inherent in the achievement of the MDGs. Chances are that billionaires will continue pursue their own philanthropic strategies and individual goals haphazardly, without cooperation with public and non-governmental actors, thereby focusing on specific issues (perhaps those that genuinely break their hearts) and conveniently avoid addressing 'hot' issues such as the reform of global finance, the regulation of multinational corporations and access to resources (both material and non-material), although these are arguably major factors in longstanding poverty and global imbalances.

If successful, the Giving Pledge will at best provide some more money for the main big charities, the most well-known international NGOs, a few pressure groups, a bunch of like-minded think tanks sympathetic to the world's super-rich and their new ambitious mission. Philanthrocapitalists will be interviewed in glossy magazines, they will explain how their successful business experience can be used in the service of the greater good, some celebrities will get involved and add to the glamour, a few gala dinners will be celebrated around the world and, perhaps, one of these philanthrocapitalists might even end up getting a ‘Scandinavian’ award. Poor countries will be inundated with Western consultants, technocrats will educate locals on the best strategies to defeat endemic poverty and experts will be flown across the planet. Beneficiaries will have no or little say over what projects will be funded and how, while expensive conferences will be held and the inevitable pundits will argue that we have entered a new era of progressive capitalism. In a few years, everything will slowly but surely go back to normal, leaving some academics and policy experts to wonder why poverty and social injustices are still there. As Michael Edwards has argued in his recent book 'Small Change: Why Business Won't Save the World', the claim that business thinking can save the world is a convenient myth for those who occupy positions of great wealth and power; and the constant celebration of rich and famous individuals is a dangerous distraction from the hard work of finding long-term solutions.

It's a pessimistic scene, but I believe that if philantrocapitalists genuinely intend to have a positive impact on society, they should focus on what they know best (that is, business) and not colonize the unfamiliar territory of social work by imposing new priorities and agendas. How? For instance, by trying to respond to the following questions: is there a way to rethink business so that it directly makes the world a better place? What business models would promote sustainable wellbeing, common goods and equality, rather than concentrate wealth in a few hands and impoverish the many?

Imagine Microsoft pledging to restructure its monopoly and become a major sponsor of free software for all. This might mean lower profits for the company, but would have a tremendous impact on access to information, literacy and economic development across the globe. It would also mean that smaller companies will no longer be stifled by the Seattle giant, thereby promoting jobs, innovation and further freedom, especially in poor countries that pay millions of dollars a day in licences to Gates’ corporation. Think of Warren Buffet converting his investment empire, which prospered thanks to financial deregulation, into private funds that support ethical investment, small cooperatives, grassroots enterprises, micro-finance groups and other forms of social economy. Thousands of medium and small investors would follow his example, thereby reducing the amount of capital that is at the disposal of financial speculators. This would affect stock exchanges and stimulate new ways to support large-scale investment into sustainable and beneficial initiatives. Picture Bloomberg News Agency becoming a civil society watchdog of financial markets, capitalizing on its global network of analysts and experts to promote a culture of saving, sharing and financial ethics. What if the Rockfellers and their like were to lobby governments to increase taxes for the wealthy, combat tax evasion (including legal ways to dodge the fiscal system) and rebuild our social safety nets? Wouldn’t this be a better to become true philanthropists and make the world a better place every single day? These are just some examples of ways to use the clout and resources of billionaires to defeat the longstanding injustices of our world. Unrealistic? Too ambitious? Perhaps, but so is the ultimate goal of the Giving Pledge.

Since big business is often implicated in the injustices that philanthropists would like to address, progressive billionaires should concentrate on cleaning their dirty laundry first. To this end, they could come up with a ‘business pledge,’ that is, a moral commitment to reform the financial and economic system they have profited from with a view to promoting a binding code of conduct for those who intend to do business in ways that directly benefit communities. This would be a revolutionary pledge. One they could make in the blink of an eye, if they really wanted to. A pledge that would hold the potential to have a long-term positive impact on the world, change how the global economy works and inspire thousands of other business people across the world. Such a commitment would be more credible and effective than a ‘giving pledge’ to return some money back to society once the harm is done.

Writing about the Great Depression, American novelist John Steinbeck warned against those businessmen ‘Who spend two thirds of their lives clawing a fortune out of the guts of society and the latter third pushing it back.’ So the question is: can like-minded billionaires address social injustice at its source rather than scratching the surface with their glamorous philanthropic initiatives? Can they effectively dismiss Steinbeck’s accusation that ‘giving can bring the same sense of superiority as getting does, and philanthropy may be another kind of spiritual avarice’? As a matter of fact, true philanthropy might have very little to do with giving and charity. In ancient Greek it means ‘love for mankind.’ The best way for a businessman to be a true philanthropist is to promote economic activities that help society directly, every day, even if not one cent is spent on charity. 

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