Inequality and charitable giving
Today’s economic inequality is reminiscent of America’s
Gilded Age. Andrew Carnegie, the steel and railroad baron whose gifts built and
endowed over twenty-five hundred local libraries, was perhaps the richest man
in history.
In his “Gospel of Wealth,” Carnegie argued that the wealthy
had an obligation to use their wealth for the common good. He rejected the
alternatives of leaving the bulk of one’s wealth to family or to the poor, both
of which almost certainly would produce undesirable results.
Three years after authoring “The Gospel of Wealth,” Carnegie
broke a strike at his Homestead steel works in Pittsburgh. The workers went on
strike when management proposed a thirty-five percent pay cut for workers. To
break the strike, Carnegie relied upon armed guards who, when a riot ensued an
attempt by scabs to enter the plant, killed sixteen.
Is it possible to gain great wealth ethically? If so, why do
large corporations consistently lobby the federal and state governments to
enact legislation that will provide their industry and, more specifically,
their business with a competitive advantage? Legislative or regulatory
competitive advantages tilt the playing field in favor of certain player(s),
thereby eroding the equal conditions that inherent in fair competition.
Following the example of Carnegie, Rockefeller, and others,
today’s wealthiest (e.g., Gates, Buffet, Kochs, and other billionaires) are
endowing foundations and committing the bulk of their assets to philanthropy. On
its face, this giving would seem to counterbalance some of any evil entailed in
accumulating great wealth.
One problem with that conclusion is that the wealthy may not
use their money for causes that I (or you) endorse. Illustratively, as a
liberal I disagree with many of the political causes the Kochs support; as an
advocate of democracy, I object to political activism (efforts to shape public
policy) being cloaked as philanthropy and to that political activism thus receiving
many of the tax benefits associated with philanthropy.
Another problem is that if the accumulation of great wealth
depended upon laws or regulations that tilted what a theoretically level
playing field in favor of the one who accumulated that wealth, philanthropy in
no way compensates those who suffered because of unfair competition. This is
directly analogous to how local libraries, several institutions of higher
learning, and other Carnegie philanthropy did nothing to alleviate the horrendous
working conditions of his employees nor the poverty in which they and their families
lived.
Carnegie in “The Gospel of Wealth” wrote
Individualism, Private Property,
the Law of Accumulation of Wealth, and the Law of Competition … are the highest
results of human experience, the soil in which society so far has produced the
best fruit. Unequally or unjustly, perhaps, as these laws sometimes operate,
and imperfect as they appear to the Idealist, they are, nevertheless, like the
highest type of man, the best and most valuable of all that humanity has yet
accomplished.
Even from a strictly materialist perspective, Carnegie’s
assessment of the best results of human experience is disturbing. His flawed list
omits love, friendship, knowledge, and art.
Furthermore, each item on Carnegie’s list is a limited
instrumental good, not an absolute good. No person is an island; promoting
individualism as the highest aim undercuts the inescapable web of community
that supports each person. Private property similarly depends upon government establishing
and maintaining law and order as well as services from which all benefit and
yet for which none pays directly (economists refer to these goods as common
goods, e.g., a public park benefits all, those who use it directly as well as
those who see it or even think about its availability). Competition should be
fair, which requires a level playing field. Accumulation of wealth is, per se,
not bad; accumulation of wealth by exploiting others or avoiding communal
responsibility is immoral.
Carnegie does favor the estate tax over leaving large wealth
to heirs. However, he prefers for the wealthy to give their assets directly for
the common good. His preference rests upon two widely held but erroneous
presumptions.
First, Carnegie presumes that he knows how to benefit the
common good than does our democratically elected state and federal legislatures.
I disagree. An ability to earn money is not necessarily indicative of an
understanding of how best to improve the common good. Legislatures are imperfect.
However, given the choice between relying upon legislatures or the wealthy to
act in a way that will best benefit the common good, I prefer to take my chances
with legislatures that embody multiple voices, have different perspectives, and
represent varied constituencies.
Second, Carnegie presumes that government spending involves more
waste than does individual philanthropy. Examples of wasteful government
spending abound (e.g., studies with no apparent social benefit, expensive
airplane parts, unnecessary travel, Medicare scams, etc.). Critically, those
examples collectively do not amount to even one percent of government spending.
Large scale waste – well-intentioned programs such as some job training initiatives
that fail to achieve their objectives or defense contracting cost overruns –
are generally ignored. Including both small- and large-scale waste, most
government spending is still beneficial, paying for schools, police, roads,
Social Security, much healthcare, and more. These are items towards which few
charitable dollars are expended.
Five hundred foundations exist today for every foundation
that existed in 1930; their assets have grown from less than a billion dollars
to over eight hundred billion dollars (Robert Reich, “Just Giving: Why
Philanthropy Is Failing Democracy and How It Can Do Better”). In spite of this dramatic
increase in charitable giving by the wealthy, inequality continues to grow, leaving
the bottom twenty percent ever further behind.
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