The Corner

Businessmen vs. Philanthropists

There is a fabulous article in the Wall Street Journal today by Kim Dennis of the Searle Freedom Trust about the pledge by 40 of America’s richest people to donate at least half of their wealth to charity. The piece addresses many great and counterintuitive points about the value and productivity of charitable giving versus entrepreneurship, as well as the common perception that successful businessmen have an obligation to give back to society because they owe their success to it.

To the first issue, she writes:

What are the chances, after all, that the two forces behind the Giving Pledge will contribute anywhere near as much to the betterment of society through their charity as they have through their business pursuits? In building Microsoft, Bill Gates changed the way the world creates and shares knowledge. Warren Buffett’s investments have birthed and grown innumerable profitable enterprises, making capital markets work more efficiently and enriching many in the process.

Other signers of the pledge, like Oracle’s Larry Ellison and eBay’s Pierre Omidyar, have similarly transformed the way people all over the world exchange information and products. They have democratized the transmission of ideas and goods, creating opportunities for people who never would have had them otherwise.

and:

While businesses may do more for the public good than they’re given credit for, philanthropies may do less. Think about it for a moment: Can you point to a single charitable accomplishment that has been as transformative as, say, the cell phone or the birth-control pill? To the contrary, the literature on philanthropy is riddled with examples of failure, including examples where philanthropic efforts have actually left intended beneficiaries worse off. The Gates Foundation has itself acknowledged that one of its premier initiatives—a 10-year, $2 billion project to reorganize high schools around the country into schools with fewer than 400 students — was a complete bust. Good for them for admitting it. In that, they are unusual. In the failure, they are not.

Think about the millions of dollars spent by Andrew Carnagie to get nations together — Great Britain, the United States, Germany, Russia, and France — to promise they would never go to war.

To the second point she writes:

Successful entrepreneurs-turned-philanthropists typically say they feel a responsibility to “give back” to society. But “giving back” implies they have taken something. What, exactly, have they taken? Yes, they have amassed great sums of wealth. But that wealth is the reward they have earned for investing their time and talent in creating products and services that others value. They haven’t taken from society, but rather enriched us in ways that were previously unimaginable.

These are very good points, and I never quite thought about it this way before. On the other hand, though Dennis (who works for a charitable organization) may be right that “there is nothing inherently better or nobler about using one’s resources for charitable purposes,” I am certainly grateful that businessman extraordinaire Daniel Searle devoted so much of his fortune to supporting the work of scholars like me in order to make the world a better and freer place. I am also grateful that people as talented as Dennis are willing to work for such organizations.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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