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The Philanthropic Midas: Lifting the Curse of Donation Indecision

I was sent a link to a recent article about Bill Gates and his views on wealth, taxation and philanthropy. If you can dial down the familiar dismissive murmurings (‘well that’s easy for him to say with all his billions’ etc.), he raises some interesting questions. The primary one being, ‘should billionaires even exist?’

Earlier this year Oxfam estimated that the world’s 26 richest people own as many assets as the world’s poorest 3.8 billion people. 26 people – that’s four desk banks in my office with the same collective wealth as half the world’s population.

After Tweeting to ask his followers which philanthropic causes he should support, Amazon founder Jeff Bezos decided in mid-2018 that the only way he that he could see to deploy his level of financial resource is to invest in space travel. He seems puzzled, as if it’s unfathomable for one human being to be so wealthy. Gates said last week: “I don’t deserve my fortune. Nobody does.”

Billionaires’ remorse may seem a fantastical concept but luckily we have myths and legends as a guide. According to Greek mythology King Midas asked Dionysus to grant his wish that everything he touched would turn to gold. When the wish was granted it obviously backfired, with the final straw being Midas accidentally turning his daughter to gold and begging Dionysus to lift the curse he had thought was a blessing.

So, how can we lift the curse of the Midas touch in philanthropy? I think there are two main problems to start with – the accumulation and the concentration of wealth.

Don’t just store it – spend it

There’s a brilliant chapter in Yuval Noah Harari’s Sapiens that looks into the origins and proliferation of capitalism. Harari asserts that Adam Smith’s original maxim for the capitalist model was that “the profits of production must be reinvested in increasing production.” Harari goes on: “Capitalism distinguishes ‘capital’ from mere ‘wealth’. Capital consists of money, goods and resources that are invested in production. Wealth, on the other hand, is buried in the ground or wasted on unproductive activities.”

Can we make the same distinction in how we see philanthropy? Does it tend to be linked to the ‘buried in the ground’ type of wealth accumulation, wherein a private or corporate donor stores a sum of money that doesn’t yet have a purpose in mind – like a type of charitable rainy-day fund? Or do we think of it as philanthropic capital that is always there and always ready for deployment – more of a charitable capex budget?

These are, of course, rhetorical questions, but they do propose a fundamental principle for philanthropy: money doesn’t do any good sitting in a vault.

Actually, is it unethical to keep a charitable rainy-day fund?

purpose cartoon

Dollars don’t always make sense

In Smith’s argument, the concentration of wealth is bad economics and high profits a symptom of a badly performing market. The rate of profit, he said, was “always highest in the countries which are going fastest to ruin.” That makes Credit Suisse’s annual Global Wealth report – which details just how concentrated the top tiers of the wealth pyramid are – a pretty concerning read.

Today, the US accounts for 41% of the global number of dollar millionaires. That figure is 4% for the UK. As an illustration of how out of proportion those numbers are, UN estimates suggest that the US population makes up 4.27% of the global population – and the UK just 0.87%.

On the other side of the scale, Credit Suisse estimates that India and Africa (yes, a whole continent rather than one country) make up just 1.1% and 0.6% of the global high wealth bands, yet India makes up circa 17.74% of the global population; Africa 16.64%.

So why is that an issue?

First problem: this wealth disparity is distorting the way social need is addressed. The funder dictates the issue and their approach gets tied up in their value base, their view of world problems, and their decision on the best solution.

The concentration of wealth can be literal, not just figurative. In Tower Hamlets there are so many financial powerhouses investing in social mobility on their doorstep that some companies are breaking out into new boroughs because of the overcrowding. The Credit Suisse report makes us wonder how this plays out at a global level.

At the macro level, build-ups of wealth are skewing the way corporate and private philanthropists are providing support and who benefits. Did you see that reportedly just 1% of the Harding donation to Cambridge University will be allocated to disadvantaged students AND minority ethnic backgrounds?

Apparently those two areas fall in the same bucket. And in terms of how support is provided, I could give you anonymised examples of a number of companies who deliver exactly the same type of interventions as each other. This type of approach is delivered for the convenience of the funder, rather than utility for the beneficiary. But we still call it ‘philanthropy’.

Second problem: accumulation of wealth creates a power imbalance that gives wealthy donors more authority in decision making.

Having huge amounts of charitable funds means companies can dictate which programmes and charities they invest in, instead of thinking ‘we have this money at our disposal – where is it needed?’ I’m sure Cambridge University welcomes the donation, but is there a pressing social need that means its postgrad students require a £79m scholarship fund?

Powerful donors can also treat their community budgets in the same way as they would other types of investment: ‘If I invest this, how can it maximise my return?’ There is a push to fund new ground-breaking projects that maximise return, which one delivery charity I spoke to termed ‘pilot-itis’. Another charity said, “you feel like asking, is this a donation or a contract?”

Is philanthropy a luxury or a duty?

As you’re about to see, I’m no economic theorist. But what if there is a value chain that runs all the way from the product or service you sell through to the shareholders or company owners. Let’s say that at all points along the value chain, whilst maintaining a safe and viable product, profits are retained rather than invested so that returns are maximised.

So, by saving a bit here by using non-renewable energy in production, and saving a bit there by paying staff living wages and not offering them training and development courses – all the way up the chain – a huge profit is delivered to the company owners.

With their wealth, maybe they turn to philanthropy and transfer that value to postgrad students at one of the world’s most exclusive educational establishments. Or, they may just ring-fence it and decide what to do with it when the mood takes them.

That seems broken to me.

If philanthropists have sums to donate because they have benefited from our financial systems, they have an obligation to be enablers of positive change for those who have borne the cost of those systems.

But there is a way to fix it. What if philanthropy is a way of putting value back into society where our financial systems have pared that value back?

Making giving count

When I heard about Jeff Bezos not knowing how to spend his fortune I wasn’t sure whether I was supposed to feel some sympathy for him along the ‘world’s loneliest man’ trope (like King Midas). But it’s not enough to give a lot away. It’s not even enough to give it to a cause that seems worthy or can fulfil your ambition of being innovative. If you’re not thinking about what impact you’re having and what problem you’re trying to solve, not salve, bad giving can do more harm than no giving.

In contrast, by recognising the fundamental role philanthropy plays in creating a better functioning society, Bill and Melinda Gates break the Midas curse. The Gates have donated tens of billions of dollars through their Foundation, dedicating their efforts to improving the quality of life for individuals around the world – from investing in public schools in the US to committing to eradicate malaria. These are efforts to create real world solutions to real problems that affect real people. Not funding the next space race between two US billionaires.

As the story of King Midas goes, Dionysus lifted his curse by telling Midas to bathe in a certain river. When he did, the power went into the river and turned the river sands to gold. The area was so rich in gold that it became a future source of wealth for the surrounding region. That’s what the Gates have been able to achieve, converting cumbersome amounts of riches into practical and long-lasting value for everyday people – the antidote to the accumulation and concentration of wealth.

This type of philanthropy helps to level the playing field in an increasingly unequal world – which is why it’s crucial for us to do it properly.



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