If you are already tired of reading about the latest league tables of the world’s richest, a question that ‘Philanthrocapitalism’ ( >www.landmarkonthenet.com ) raises in the concluding chapter should of interest: ‘What should it take for a billionaire to win the approval of society?’
The authors Matthew Bishop and Michael Green are of the view that while one key ingredient of philanthrocapitalism is the responsibility and willingness of economic winners to give on a large scale, another is that they apply to their giving the same talents, knowledge, and intellectual vigour that made them rich in the first place. “Philanthrocapitalism is about being a businesslike giver.”
The book, sub-titled ‘How the rich can save the world and why we should let them,’ calls for a new ‘social contract’ between the rich and everyone else. “For their part, society should expect the rich to pay their taxes, earn their money honestly, and give generously and effectively. If they do so, the other side of the bargain is that everyone else should suspend their learned cynicism about wealth and engage in a constructive conversation about how to help their philanthropy achieve its considerable potential,” reads a snatch in the preface.
An example of cynicism cited in the last chapter, titled ‘The gospel of wealth 2.0,’ is the opinion of Peter Singer who wonders if Bill Gates is generous enough, and who says that the rich should give away most of their money on the grounds that most of the credit for their wealth creation belongs to society.
As they don’t create the favourable social circumstances with abundant ‘social capital’ (including the rule of law, the education system, high levels of trust between individuals, and so on), the society has a strong claim on much of their fortune, according to Singer, “especially if the estimate he cites by economist Herbert Simon is right, that at least 90 per cent of what people earn in wealthy societies is a product of ‘social capital.’”
The authors, however, find the 90 per cent estimate to be controversial, since there is little agreement among economists on how to measure social capital. Also, the society has a long-established process of charging people for the use of its social capital, through taxation. “Nowadays, in contrast to the mid-twentieth century, nobody in government thinks that the tax rate for wealthy people should be anywhere near 90 per cent.”
This ‘change of heart,’ as Bishop and Green describe, may owe more to the practical impossibility of collecting high rates of tax from people who can afford the best accountants and bankers to move their money around the world to wherever tax rates are lowest. “The nooks and crannies of the global tax system allow for perfectly legal tax-avoidance strategies that can sharply reduce a wealthy person’s (or rock band’s) payments to the state.”
Turning to the giving side, the authors acknowledge that every successful businessman has a tricky decision to make as he considers becoming an active philanthropist: “It is not just about when to stop accumulating money and start putting it to work, but whether the social good that results from spending his days focused on business is more less than the good that would flow from instead spending the time focused on giving.”
The givers are growing in number, with the influx often from many of today’s booming ‘winner-takes-all’ industries, from software to finance to sport, as Bishop and Green see. “People get to the top faster and careers at the top tend to be relatively short-lived. That is why a growing number of wealthy people are able to become philanthropists at a far younger age than in the past, and why they are probably right to devote much of their time to giving rather than trying to make more money.”
Any rankings, though, should be based on what philanthropists actually achieve with their giving, the authors propose. “Among other things, that will require much greater transparency about what money is given to and how it is used, combined with serious impact analysis and public debate.”
Absence of such transparency, the authors caution, can give rise to pubic scepticism, which in turn may lead to demand for tighter regulation, limits on foundation size, re-look at tax exemptions, and so on. The result can be a greater role to legislators and bureaucrats, inhibiting ‘the imagination, innovation, and risk-taking that lie behind the best philanthropy.’
Recommended read.
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