Inequality and Philanthropy: part of the solution or part of the problem?

Oxfam put out a media briefing this week ahead of the Budget announcement which grabbed a lot of headlines. It was based on a report (A Tale of Two Britains) which highlights the growing issue of income inequality in the UK, with the “killer fact” that five families in the UK now own more wealth than the poorest 20% of the population put together (roughly 12.6 million people). This is basically a stark reworking of the “1% of the world’s population own 50% of the wealth” statistic that underpinned the whole Occupy movement, and seems to have been successful in putting the wider issue of inequality at the front of people’s minds as the standard annual drip-feed of stories about giveaways and tax tinkering gathers pace in the run up to the Budget.

 

This got me thinking again about a favourite topic of mine: what are the implications of growing income inequality for philanthropy and vice versa? This is a question that highlights what I think are some of the most difficult challenges for advocates of philanthropy. It is a question that we have to face up to in order to understand properly the positive power of philanthropy and the role it can play in our society.

 

Inequality has become one of the key global issues concerning policymakers and campaigners, and is also the focus of many philanthropists’ efforts. A New York Times article last week highlighted a new book by an academic at the Paris School of Economics which uses historical and economic analysis to argue that without intervention, inequality will continue to grow for a long time to come. This potentially counters the free-market doctrine that inequality eventually stabilises and subsides as a result of economic growth, and suggests that there is a need for governments, philanthropists and others to act if we are to stem the rising tide of inequality.

 

Philanthropy has a complicated and uneasy relationship with inequality. On the one hand, inequality is a necessary precondition for philanthropy (at least for “philanthropy” in the sense of altruistic giving by the wealthy to the needy) because it requires there to be people with money who are willing to give it away to help those with far less money. On the other hand, however, many see philanthropy as a tool to address that inequality and the problems it causes. Is this a tension that we can resolve? Can philanthropic giving ever truly be used to address the causes of inequality if it relies on that inequality in order to exist in the first place? Some would even say that the problem is more serious than this, arguing that philanthropy does not simply require inequality as a precondition, but that the practice of philanthropy actually unavoidably exacerbates inequality.

 

This latter view was the crux of an opinion piece in the New York Times last year by Peter Buffett, son of famed billionaire philanthropist Warren Buffett, which argued that almost all philanthropy is merely “conscience laundering” by people who have made money in ways that are largely to blame for the social problems they profess to wanting to solve. I thought this article was fairly flawed (for a critique, see this Huffington Post blog by CAF’s CEO John Low), but there is certainly the kernel of a valid argument in it which cannot be dismissed that easily. In considering whether philanthropy can be a tool to address inequality, we have to consider not only whether there are effective interventions aimed at addressing inequality, but also whether the process of generating philanthropic wealth gives rise to externalities which act in the opposite direction and make the problem worse.

 

The question of how charitable funds are generated versus how they are spent is not unique to philanthropy. There is a clear analogue in something like the issue of whether charities should invest their assets ethically, which raises similar questions about whether it is better simply to generate greater financial returns which can be use for philanthropic purposes, regardless of how that is achieved, or whether we also need to take into account the way in which wealth is generated, even if that means a reduction in pure financial returns. (See my previous blog on charities and ethical investment for more on this).

 

Given any social issue or charitable purpose, one can see how certain ways of making money might be at odds with a stated desire to address that issue, and might dictate altering one’s approach to wealth generation. However, when the issue in question is inequality, the challenge might be even greater because the act of wealth generation itself could be the problem, regardless of how it is achieved.

 

Although wealth generation need not necessarily be a zero-sum game, in which one man’s riches come at the expense of another man’s poverty, we must also avoid the neoliberal doctrine of the “trickle-down effect” and the flawed assumption that the benefits of wealth generation automatically spread out to everyone in society. The truth is, as usual, somewhere in the middle. While we are all working within the current economic paradigm, it remains the case that the wealth that is generated concentrates in the hands of a small minority of individuals and the gap between them and the rest of society grows wider and wider.

 

We can see this happening in practice in somewhere like New York. Despite becoming a global beacon of philanthropy under the mayoralty of Michael Bloomberg, himself a major philanthropist, the new mayor, Bill de Blasio, won a landslide victory last year on the back of a campaign in which he highlighted the impact of inequality in the city. For more on this story, check out my blog about it.

 

The problem is not simply about the way in which wealth is generated either. The way it is given away may also have an impact on inequality. This is because, despite some philanthropy being targeted towards addressing inequality, it remains true that the majority of giving by the wealthy (certainly in the UK and US) is to universities and cultural institutions (See CAF’s report on US/UK giving for more on this). Even if the benefits of these donations are in fact felt much more widely, they still have the effect of reinforcing cynicism about philanthropy being a plaything of rich people whose interests are a world away from the reality of most people’s lives.

 

So what is the answer, you might (perfectly fairly) ask? Can philanthropy be a positive force for addressing inequality, or is it symptomatic of the flawed system that has produced such inequality in the first place? Unsurprisingly, I don’t have a simple answer to this question. I think there are very valid concerns about the way in which wealth is created, and challenges in terms of how it is given away, that have to be addressed by any philanthropist with an ambition to tackle inequality and poverty.

 

However, I do not subscribe to the Peter Buffett view that any philanthropist with such a professed ambition is merely “conscience laundering”. Whilst it is not an easy thing to do, it is possible to use philanthropic capital in a way that is almost designed to “make philanthropy redundant” by eliminating the conditions and the need for it to exist. And pragmatically, this is the only real choice, because the fact remains that there is inequality in the world and it is certainly better that some of those who have benefitted from it attempt to put their resources to use for the good of others rather than simply keeping those resources for themselves.

 

This is one of those instance where attacking philanthropists for the perceived sins of the wealthy as a whole seems a little unfair. While there are many valid issues that philanthropists must face and challenging questions to answer, criticising them in this context ignores the fact that they are the ones who have decided to try to use their wealth to help others, when many of the world’s wealthy are not even doing that. Philanthropists should be given credit for this, rather than made scapegoats, even as we continue to tackle the challenges that inequality poses for the idea of philanthropy.

 

Rhodri Davies

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