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For Better or Worse? Philanthropy’s Failures

For Better or Worse? Philanthropy’s Failures

By David Moncrief (10/19/13)

Peter Buffett, billionaire Warren Buffett’s second son, speaking of the philanthropic sector in a New York Times article says, “it’s time for a new operating system.” Buffett points to several factors that explain the ballooning non-profit sector’s failure to improve the conditions they are supposedly addressing, despite the rising donations. In fact, the very mechanism that he says thwarts the local level policy implementation of these non-profits reproduces and exacerbates the gross inequalities we see around us.

Today we have an era of philanthropy unseen before, yet as Buffett claims, this only coincides with the heightened inequality that parallels that of the “Gilded Age,” and as such is mixed with the guilty consciences of the ever-richer 1%.

This new philanthropy comes at a time when over the past few decades, economic inequality has been rising more rapidly than ever. Brought on by globalization, neoliberal policies, and the transformation from a manufacturing economy to a largely financial services one, the top 10% in the United States has seen a coinciding transfer of wealth. Since the late 1970’s when this transformation began to take place, American wealth and income have been steadily usurped by those at the top. In 2007, two-thirds of American’s net worth was in the hands of the richest 10%. One year later this top 10% also earned almost half of all paid income. In this new economy there has been heavy influence and importance placed in the hands of the markets, institutions, and elites who operate the economy. As such, financial sector logic has become the guideline for previously unrelated sectors.

Philanthropy is one such sector. In 1978, 4% of all money donated to charities was placed in a foundation, a tax-advantageous vehicle for surplus wealth. That number rose to 11% by 2010, meaning that an increase in money was being donated not for direct use by charities dealing with people but instead kept away and invested according to the donor’s demands. Ultimately, with the changing of the economy, the rise of this era of philanthropy has both been incited by the inequality produced and thwarted by its corrupting influence.

Buffett’s cumulative experience of friends and family allows him to distill down the inefficiency of today’s philanthropists to what he coins “Philanthropic Colonialism.” This is when elites ignorant to the “culture, geography or societal norms” attempt to use plug-and-play techniques or practices previously used in a different environment. This leads to unintended consequences that either change the system’s dynamic or fail to treat the cause and focus only on the symptom. One such instance that Buffett notes is when the free distribution of condoms in a brothel area led to the increased price of unprotected sex. In this attempt to quell the spread of AIDS the effect was not the solution desired. As in other cases, the intentions were to increase the standard of living or improve the society by reducing inequality or hardship, but the lack of comprehensive understanding of local issues leads to the ineffective waste of foundation dollars. “Philanthropic Colonialism,” though, is not the most damaging factor when related to non-profits’ failure to reduce inequality.

The non-profit sector, since 2001 to 2011, has increased by 25%. This rate has dwarfed the growth of both the business and the government sectors. This industry in 2012 gave away $318 billion and employed 9.4 million Americans. Yet inequality is still rising. Buffett’s explanation for this is what he calls “conscience laundering,” in which a donor gives a small portion of their income in an attempt to make right with the community and world they hold such power in. What this shows is the inherent injustice of the system with which income is distributed. While Buffett explicitly states that he is “really not calling for an end to capitalism,” he does place blame on the globalized market and the injection of business principles into the institution whose aim is to fight off the inequality those very principles created. It is not that the people in the world today making untold amounts of money are evil; the system in which they operate dictates their actions more so than those of lower income. The leadership roles they hold and the methods by which they have attained their status lead to feelings of self-worth and belief in the status quo.

The very act of their contribution to non-profits, an action that as a percentage of their income has been increasing over the past decades, shows their intent is not wholly self-centered and misanthropic.[i] Yet the arrogant confidence that robs them of success at solving local issues also blinds them to the real source of the inequality they aim to diminish. Their recognition of inequality’s causes and symptoms is incomplete. It is not just the children dying from starvation, while surpluses of eggs are dumped in the sea on the other side of the world. It is not just the families evicted from homes for a fiscal crash that paid bonuses to the people who caused that crash. It is not just a superpower’s two-faced story about spreading democracy to one nation while supporting a dictator in another.

No, it is not just that, a coin has two sides and on the other is their wealth. The cause overlooked, ignored, and glossed over to be the result of such blatant inequality is their wealth. For the very same mechanism that dooms these billionaire philanthropists’s efforts to failure also deludes them of the fact that when one takes an all-inclusive look at worldwide systemic inequality’s causes and symptoms, they need only look in a mirror.


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