The Philanthropy Trap

16 June 2016

Is philanthropy an unalloyed good? Or does philanthropy have its downsides too?

If you’re wondering what could be wrong with individuals voluntarily giving to charitable causes that serve the public good, let me just narrow the scope of my criticism to giving from the ultra wealthy—fat cats like Bill Gates or John D. Rockerfeller, who set up these huge foundations worth billions of dollars.

It’s not that I think the world would be a better place if these billionaires simply blew all their money on frivolous luxuries. My concern is that these foundations set up billionaires to decide exactly what counts as the public good. And who are they to make such decisions? Making billions of dollars does not make you an expert on the needs of society.

Of course, in our capitalist society, money equals power. And when you’ve got tons of money, you can influence all sorts of things that ordinary people simply can’t. Whether we like it or not, that does seem to be the way the world works. So, the wealthy have a greater say on what counts as the public good, and those who fund foundations or direct initiatives get to shape public policy in ways that you or I do not.

I don’t want to get into a discussion here about the problems with capitalism, and how the vast economic inequality it creates is the reason for such power asymmetries. The point is, though, that these power asymmetries are fundamentally undemocratic. They give the wealthy too much influence in deciding what the greatest needs are for society at large and they silence the rest of us. If we lived in a true democracy, surely what counts as the public good is something that ought to be decided by the people.

But, given that we do live in a capitalist society with vast inequality, what is the alternative? Isn’t it better that the super rich donate some of their wealth rather than spend it all selfishly on themselves and their families? Other than overthrowing the capitalist system, are there any other possibilities?

One obvious candidate is to impose a much greater tax on the ultra wealthy. If we actually taxed the 1% more, we could use their wealth to do lots of good in the world, without them dictating what counts as the public good. Wouldn’t this be more democratic?

Sadly, that does not seem like a completely satisfactory answer. For a start, it’s not as if we, the people, have much power in deciding how our taxes are spent. How much of these taxes on the ultra wealthy would actually be spent on the public good and not on, say, funding more wars? If we had confidence that giving the government more money was a good way to serve the good, then more of us would choose to do that rather than donating to our favorite charities.

Second, government is so often mired in bureaucracy, and it can be so slow to adapt to the quickly shifting social landscapes. These foundations are not so bound and thus can change their priorities more easily.

Third, it’s not clear that governments even have the will to tackle these big social problems. Or if they do, their efforts are obstructed at every turn by ideologues who think that if the market doesn’t provide social goods, government has no business doing so either.

So what is the answer?

Would the world be a better place without charitable organizations that are funded by the billionaire class? Or do we need organizations like the Gates Foundation and the Clinton Global Initiative to tackle chronic social problems?

Should we welcome the input of successful entrepreneurs, both in terms of their money and their innovative ideas? Or will we just end up with the equivalent of an app to “solve” homelessness?

Comments (5)

Gary M Washburn's picture

Gary M Washburn

Friday, June 17, 2016 -- 5:00 PM

Most government agencies are

Most government agencies are more efficient than their private sector versions. Government is mired in politics, not bureaucracy. There's more paperwork in buying a car or home than in doing taxes, just as an example. It's a bit impertinent to foreclose the subject of capitalism. Capitalism is the whole point. It is simply feudalism by another name, on the basis of capital 'title' instead of land 'title'. But there certainly is no good reason to take charity on face value. People who "do good" generally get a pass. But if you remember that, even where a tax deduction is not parlayed into a sneaky profit source, much of the "donation" comes from the public, and the public should therefore have a right to revue and regulate how and on what that "charity" is spent. It is all too easy to forget the fundamental question, whose money is it, really? Just because the law turns a blind eye on how obscene profits are generated doesn't mean they are well earned. And it certainly doesn't give the wealthy the right to think of the revenue diverted by a tax loophole is their own money. Tax revenue is our money, not yours mine and theirs. And "ours" includes even those of us too poor to have any tax liability at all. And that's the danger I'd like to point out, that the diversion of tax revenue into 'private charitable donations' promotes the misapprehension that representation is proportionate of wealth. Perhaps it should be, but if so, inversely.  By the way, the use of "LLC" is easily confused with a limited liability partnership, a very different animal altogether, or maybe I'm the only one who trips on the similarity.

Harold G. Neuman's picture

Harold G. Neuman

Friday, June 17, 2016 -- 5:00 PM

Your three little words said

Your three little words said it succinctly: money equals power. And regardless of what they will insist upon telling us, philanthropists revel in their power and the acclaim earned(?) through throwing large sums of money around. I had a comment or two about this on one of PT's other posts concerning altruism and such like. In short, though, the money/power addiction is seductive. And when one is giving one away to enhance the other, it all seems so, well, generous. Until we really start to think about it.

davemc's picture


Sunday, June 26, 2016 -- 5:00 PM

Otherwise known as the Golden

Otherwise known as the Golden Rule.  He who has the Gold makes the Rules. 

yeedenn's picture


Tuesday, February 26, 2019 -- 12:55 PM

There's a certain irony in

There's a certain irony in hearing this topic discussed by three professors from a university whose campus is bristling with buildings, research centers, endowed chairs — and benches— all bearing the names alumni whose maecenism is sweetened by the prospect of a bit of semi-immortality, promised by the development office, when other public institutions of higher learning in the state are scrimping and scraping. Would the discrepancy be less marked if the tax advantages of philanthropy were extended only to anonymous gifts, in which case a donor would have less incentive to give to Stanford than a more worthy institution?