The power of giving
MODERN-AGE PHILANTHROPY AND ‘SUPER- CITIZENS’ MAKE THE GILDED AGE LOOK TARNISHED
The Givers: Wealth, Power, and Philanthropy in a New Gilded Age By David Callahan Aldred A. Knopf 352 pp. $ 38.95
Thomas Piketty’s Capital in the Twenty- First Century, published in 2014, explained modern inequality in capitalist countries, but it was a rather dry exercise that relied heavily on numbers. In The Givers, David Callahan brings inequality to life. He draws a startling picture of the astounding growth of private American wealth in the past quarter- century, the people who have accumulated it and the ways they are using their money, often aggressively, to change the world — sometimes for the better, sometimes not.
Callahan’s account of how the rich exercise power in modern America is ominous and grim, though he avoids drawing the darkest conclusions his evidence would support. He admits only to being “troubled” that donations of huge amounts of cash enable power to move from public institutions “into private hands” of people whose influence can make them “super-citizens.” He acknowledges that “after three decades of rising inequality” in America, “it’s unnerving to watch rich people, however smart or well meaning, amass even more power.” He’s worried that giant endowments of family foundations will allow this power to be inherited by generation after generation. “There may be no better way for the super-rich to ensure lasting clout for their heirs than to dedicate their wealth to philanthropy.”
Many readers of Callahan may draw harsher conclusions than he does about a system funded by all (through the tax deductions Americans can take when donating money to philanthropic causes) that empowers only a few to spend vast sums to advance favourite causes and, often, to preserve their own status atop American society. Under lax and laxly enforced tax laws, those causes can be controversial and entirely political, and still be taxdeductible. The Koch brothers, George Soros and many more get large tax deductions for contributions that are obviously political. Callahan estimates that deductible contributions to “policy and advocacy groups” with political missions add up to “the low billions, less than $ 10 billion.” These deplete the treasury without any public official having a voice in the matter.
The starting point of The Givers is a powerful description of how much wealthier and more numerous the richest Americans have become just in the past generation. “Rich” is not what it used to be. I remember when J. Paul Getty, the oilman, was the archetypal rich American, in a class by himself. When Getty died in 1976, he left an estate of about US$8 billion in today’s dollars. A fortune of US$8 billion ( that’s $ 8,000,000,000 — think how that would look on your bank statement!) today would rank 55th on Forbes Magazine’s list of the 400 wealthiest Americans. Forbes credits Bill Gates, first on that list, with a personal fortune of US$81 billion — 10 times Getty’s wealth. Everyone on Forbes’s top 20 is worth more than US$20 billion, which happens to be roughly the gross domestic product of Iceland.
In Getty’s day, great wealth was rare; today it’s more commonplace. Forbes identifies 540 American billionaires. Callahan reports that 70,000 Americans are worth more than US$ 30 million. Five thousand American households have assets worth more than US$ 100 million — without counting their real estate.
They are a diverse group, but Callahan argues persuasively that a common thread now connects many, probably most of them: They believe in charity. Giving away vast quantities of money is a status symbol for the super-rich. Callahan quotes Michael Bloomberg ( net worth: US$ 45 billion) on the subject of great wealth: “You can’t spend it, and you can’t take it with you.” Concludes Callahan, “Philanthropy is the only real place the money can go.”
Since 2000, wealthy Americans have created 30,000 new foundations and 185,000 “donor-advised funds,” a way for the wealthy to pool their resources without going through the complicated process of establishing a foundation. This trend is likely to continue.
And of course, a lot of the resultant philanthropy has been a boon to many American communities. There are countless new museums, enriched schools and colleges, medical research laboratories, foreign assistance projects, and much more thanks to the creative efforts of the best philanthropists.
There have also been bitter controversies over charter schools, teacher tenure, gun control and many more issues fuelled by philanthropic efforts to change the country. And there is room for resentment. As Callahan writes, “The more active the rich have become in injecting their money and preferences into public life, the less that ordinary people may feel that they can compete and the more they may tend to withdraw.”
Gates is the leading example of the new philanthropists who are Callahan’s subject. The founder of Microsoft and his wife, Melinda, have richly endowed the Gates Foundation, with help from their friend Warren Buffett. Its assets today are nearly US$40 billion, more than three times the endowment of the Ford Foundation, or nine times the Rockefeller Foundation’s. In the 16 years it has existed, the Gates Foundation has given away more than US$ 37 billion, but this is only a modest first step. The Gates’ are committed to giving most of their fortune to the foundation, which means it will have perhaps US$ 150 billion to distribute in the years ahead. And the Gates’ have committed to giving out all their foundation’s assets within 20 years of the death of the surviving spouse. Already the Gates Foundation has helped control the AIDS epidemic in Africa, reduce malaria, create the Common Core school curriculum and a great deal more.
“For all the philanthropy we’ve seen in recent years,” Callahan writes, “it’s nothing compared to what lies ahead.” Gates and Buffett persuaded scores of the superrich to sign a giving pledge committing them to donating at least half their wealth to philanthropy. Many who didn’t sign that pledge have independently made similar or even grander promises.
The prospects for the growth of philanthropy are so good, Callahan argues, that within the next few decades, philanthropic spending could exceed discretionary, non-defence spending by the federal government — that is, what the government spends on everything but entitlement programs ( Social Security, Medicare, Medicaid, etc.) and the defence budget. In other words, in the realms of social programs, medical research, assistance for poor people and many more, philanthropy (directed by private citizens unsupervised by any public authority) could supplant the federal government in the foreseeable future.
The super- rich tend to feel entitled, probably inevitably. Bloomberg is my favourite example. His fortune came from a business he invented that provides critical information about companies and markets to investors. The business was great, but it bored him. He decided he should be mayor of New York. He spent US$ 85 million of his own money on his first campaign, many times more than any previous mayoral candidate had spent, and enough to win. When he ran for re- election, he spent US$ 74 million on that campaign. Then he decided he wanted a third term, which required the City Council to change a term- limit law, which some saw as hubris. Bloomberg’s poll ratings tumbled, but his charitable activities accelerated all around New York to help buff his image. The third race cost Bloomberg US$ 109 million. He outspent his opponent 14 to 1 but won only narrowly. Many New Yorkers thought he was a great mayor, but the only way he could get the job was to buy it. The US$ 268 million he spent on his elections is some kind of record. Is this the American way? Perhaps it now is.
Callahan, creator of the online publication Inside Philanthropy, is not a great writer. He uses the dreadful phrase “for starters” at least five times in these pages, a symptom of his predilection for the language commonly found in PowerPoint presentations. His book is really an extended piece of journalism, reporting a great many intriguing facts. Analysis is not a strong suit, and his caution in judging the giant egos of the philanthropists he writes about can be frustrating. But Callahan has performed a public service by assembling a striking body of information on a fundamental aspect of 21st-century America, a century when the wealth of the average family has stagnated while the wealth of the rich has soared.