The philanthropy paradox

The philanthropy paradox
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First Published: Wed, Aug 11 2010. 09 48 PM IST

Photo: Steve Pope/Bloomberg
Photo: Steve Pope/Bloomberg
Updated: Wed, Aug 11 2010. 09 48 PM IST
A couple of days before several US billionaires pledged at least 50% of their wealth to charity, economist Paul Krugman lamented about how the American governing elite is defining prosperity down. As a high unemployment rate becomes chronic, Krugman wrote: “…a once-unthinkable level of economic distress is in the process of becoming the new normal.”
At around the same time, Harvard law professor Elizabeth Warren made a passionate speech about restoring the great American middle class. Warren, who chaired the Congressional Oversight Panel created to investigate the US banking bailout, is now a front-runner to head the newly formed Consumer Financial Protection Bureau.
These voices are a sobering contrast to the excitement about big giving by US billionaires. They compel us to examine the contradictions that afflict the US republic.
Since Indian business and media seem more influenced by the version of American capitalism that currently wields power, a rather knee-jerk question is being posed here: When will India’s super rich become so generous?
Instead, we need to look more closely at the tensions between different, yet overlapping, models of capitalism within American society— not just its markets.
Though he is more often in the news, Bill Gates is a relatively recent entrant in this arena. It is his father, Bill Gates Sr, who is a veteran campaigner against large-scale inherited wealth. In 2002, when the Bush administration proposed a repeal of the estate tax, Gates Sr and other high networth individuals lobbied passionately against such a move.
Photo: Steve Pope/Bloomberg
In Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes, a book he co-authored with Chuck Collins in 2002, Gates Sr emphasized that individual wealth is an outcome not just of hard work but also the ground laid by society for success. He was also voicing an old American anxiety: If inherited wealth is neither heavily taxed, nor given away voluntarily, it creates a dangerous and permanent aristocracy—precisely what the US republic was meant to break away from.
Paradoxically, Gates Jr is both a worthy inheritor of these values and a challenge to the future of true economic democracy. He built a large fortune virtually from scratch and has committed the bulk of it to welfare activities across the world. He is also trying to foster creative capitalism—“an attempt to stretch the reach of market forces so that more companies can benefit from doing work that makes more people better off.” This is an approach that treats inequity as a business opportunity.
It is significant that Gates feels the need for “a system that draws in innovators and businesses in a far better way than we do today”. He has also acknowledged that there are problems in the world that simply are not amenable to market incentives. Gates’ answer to this anomaly is a missionary zeal for increasing the volume and reach of philanthropy.
So why is such philanthropy a challenge to economic democracy? Because billions of dollars dedicated to the charitable distribution of life-saving drugs may not be as powerful as altering global intellectual property regimes in ways that make the medicines affordable for more people.
One version of capitalism dismisses this proposal on the ground that companies cannot make the large, long-term investments required to produce miracle drugs if there are no super profits at the end of the tunnel. Votaries of another version point out that many companies have actually earned super profits by tweaking discoveries that came out of publicly funded labs. Besides, there are now grave concerns about excessively restrictive patent regimes stifling creativity and acting as barriers to rapid cross-fertilization of ideas.
Peter Barnes, a California-based businessman and author of Capitalism 3.0, is a proponent of the latter approach. Barnes is part of a growing network of American business people fighting to restore the power of commons—in ecology, ideas and technology. As Barnes puts it, “…the commons is the pond in which the fish of private property swim.”
Perhaps the most startling successes of this approach are the open source and free software movements —a creative commons culture that is producing some of the best and most widely used software across the world. The servers that enable us to plug into the World Wide Web are run largely on open source software.
Tim Berners-Lee, who designed the protocols that made the “www” possible, deliberately put them into the commons. He is not a billionaire, but his gift may be worth much more than loads of money given away.
This can be said without belittling generous philanthropy and the genuine compassion that in many cases drives such giving. But we should also be willing and able to grapple with the underlying power struggles of our times.
As Warren has been urging, it is not enough to have a good heart. People who wield the power of money and political influence must deploy that power to alter priorities. Instead of asking how a decision will affect banks or businesses, says Warren, they need to give primacy to how a decision will affect the middle class and the working class.
Or as John Mackey, founder of organic goods chain Whole Foods, said in a discussion called by Gates Jr, “We know how to end poverty, poverty ends with economic freedom.” Not just the freedom of opportunity and to earn profits, but the freedom to craft rules that foster dispersed wealth creation.
Rajni Bakshi is the author of Bazaars, Conversations and Freedom: For a Market Culture Beyond Greed and Fear
Comments are welcome at theirview@livemint.com
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First Published: Wed, Aug 11 2010. 09 48 PM IST