The idea of philanthropy has undergone enormous change in the last 500 years. Then, a man who had made his fortune would donate some of it to a public cause. Today, there are professional charities that collect funds on a huge scale. Their fund-raising activities are carefully choreographed and they pay celebrities huge amounts for endorsements. This is philanthropy as show-business. And then, of course, there is government philanthropy based on notions of “social justice". This is also “show-business"—in the precise sense that all is false and theatrical.

Jayachandran / Mint

Even Adam Smith, who entered the scene much later, and who famously said that “we get our lunch not from the benevolence of the butcher, the baker and the brewer, but from their self-love", understood well why human beings are philanthropic. In a sadly neglected work, A Theory of Moral Sentiments, Smith said that sympathy was a “moral sentiment" present in each one of us. We sympathize with the poor, so we are naturally inclined to help. But do we know how to help?

A true classical liberal among “development economists", a man who studied poverty in Asia and Africa deeply, was the late Peter Bauer. In his 1961 classic on Indian planning and development, Bauer made the penetrating observation that widespread beggary on the streets of India and Pakistan is not a sign of poverty; rather, beggary persists because the dominant communities in both these countries, Hindus and Muslims, respectively, believe they earn spiritual merit by offering alms. In these very countries, there are no Sikh, Parsee or Jain beggars. It would seem that we are all steeped in the moral sentiment of sympathy. And our philanthropy has negative consequences. How then can we truly “help" the poor?

While my reader ponders over this vital question, allow me to shift the discussion to government “welfare". Government netas and babus never donate their own money. Nor do they collect voluntary donations. Theirs is, by their own admission, “redistribution": They forcibly tax the rich to give to the poor. But it doesn’t end there. They then print money and spend on “social justice". India’s huge budgetary deficit has much to do with “helping the poor". In reality, the poor are paying the “inflation tax". This is “false philanthropy".

Classical liberals understood well the evil of inflation. Unfortunately, the Keynesians of our times have obscured this understanding. Keynesians are still talking of government deficits as a “stimulus". They love their “welfare state". Yet, their paper money is just a “property title without property" that is “legal tender" in all exchanges by which “real" goods and services can be obtained for the paper notes. Thus, an increase in paper property titles without any increase in the real goods and services produced can only lead to a redistribution of real wealth. Those who get to spend the paper notes first, gain. Those who get to spend them last, lose. Inflation is a tax on the poor, on savers and on all those with fixed incomes. This is no way to “help the poor". This is a falsity; this is certainly not “philanthropy". Nor is it “welfare". It is, of course, “redistributive", but in the opposite direction of that which the neta claims it to be. It takes from the poor to give to the rich.

Hard-working people must wake up to the fact that their moral sentiment of sympathy is being exploited from all sides: by beggars, by charities and by governments. But most importantly by governments. And among the world’s governments, none more than by our own government of India. In every international forum, this socialist state lays claim to being a monopolist on poverty. But the fact is that it is entrenching this poverty. It loves poverty for perverted reasons of its own.

So what do we do? First, let us wake up to the reality. Let us call for an end to all this false philanthropy. Let us not give too generously to beggars either. Let us also make the call for liberty so that the state cannot stand in the way of voluntary exchanges. In that liberated market order, let us appeal to all the people—especially the poor—to work, to produce, to exchange; in other words, to engage in “self-help". And let us put an end to inflationism. The liberal mantra is: free trade, sound money and property titles. With these and self-help, all can survive. For those who fail, let there be genuine philanthropy. State welfare based on paper money is a curse.

Bauer once wrote these telling words: “Poverty indicates just one thing—the absence of economic achievement." He then went on to add: “Economic achievements are made in markets." So let the market really be free. Remove all obstacles. Poverty will vanish on its own.

Sauvik Chakraverti is an author and award-winning columnist. He blogs at www.sauvik-antidote. Comment at