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How Philanthropy benefits Millionaires

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The selfless good deed of philanthropy usually fits the popular profile of a “good cause”. Ideally, it entails the transfer of money from the rich, to the poor. However, that is not always the case. In the US, which is considered to be the most philanthropic of nations, less than a fifth of the money donated goes to the poor. With the growth of billionaires, the number of charitable foundations multiplied, and with tens of billions of dollars being donated to various causes, why is inequality still rising? We often hear expressions such as “the rich get richer”, but as the world has entered an age of philanthropy, the focus of helping those at the bottom has swiftly shifted to helping those at the top, with education being the most popular focus in 2020. 

The first problem is that these foundations distribute funds in an unaccountable manner in most cases, where the billionaire in charge administers the funds as they see fit. The issue, however, arises from the fact that too many of these billions have been subtracted from government taxation, thanks to states that are arguably too compliant with capital and non-proportional taxation. If these funds were instead left untouched, by paying more taxes in the first place, predominantly to the management of the various states from which they were subtracted, the results would be far more effective, resulting in the proportional help to the poorest fractions of the population. The assumption that philanthropy automatically results in a redistribution of money is usually wrong. The majority of elite philanthropy supports elite causes, be it sports, art and education. Rather than making the world a better place, it largely reinforces the world as it is. 

Philanthropy is most often an expression of power and ownership. What is given and what it is given towards too often depends on the personal preferences of the super-rich. Sometimes these coincide with the priorities of society, but at other times they contradict or undermine them. Increasingly, questions have begun to be raised about the impact heavy donations have on the priorities of society. The role of private philanthropy in international life has surged drastically in the last two decades. Nearly three-quarters of the world’s 260,000 philanthropy foundations have been established in that given time, and between them, they control more than $1.5tn. The Gates Foundation alone gave £5bn in 2018, more than the foreign aid budget of the vast majority of countries. It is one thing giving $100 to each family in a given country to pay for their child’s nursery, but it is an entirely different matter investing in the state a few million dollars, and hoping for equal distribution towards nurseries. While the latter is most definitely more efficient, it is difficult to maintain transparency, with many current tax regimes being favorable to multinational corporations. 

This brings me to my next point. There are a number of tensions fundamental in the relationship between philanthropy and democracy. The sheer scale of this philanthropic giving can bias spending in areas such as healthcare, to the extent that it can defeat the priorities of democratically elected governments and local authorities. Hypothetically speaking, the donation of charitable organisations such as the Bill and Melinda Gates Foundation towards polio research. Countless time, as well as funds being donated to this one cause, can become settled on addressing a problem which is not seen as a priority by local people, in an area, for example, where polio is far from the biggest problem, moreover undermining the efforts of local governments. 

The case for tax reform, to abolish subsidies entirely, or ensure the rich can claim no more than basic taxpayers can, has been made from both the right and the left. Arguably, tax breaks distort market choices. On the other hand, it has been stated that charitable tax deductions should be ended, in order to free up billions of dollars for increased public budgets on food stamps, unemployment compensation and housing assistance. The concept of greater taxation of the rich is gaining traction all over the world. During the Democratic party presidential primaries in the US, several candidates set out proposals for raising taxes on the assets or income of the super-rich. The flourishing economic populism across Europe and in the US increases that tension, moreover, the need for an increased public revenue resides due to the costs of the pandemic. 

Overall, the problem remains deep-rooted. When it comes to addressing inequality, a well purposed philanthropist would, for example, finance educational subsidies for children from disadvantaged backgrounds, or fund training schemes to equip low-paid workers for career growth. That allows several people to exit bad circumstances, but it nevertheless leaves countless more stuck in under-performing schools or low-paid work at the bottom of the market. Only very few concerned philanthropists have so far come to finance research or advocacy to address why so many schools are poor or so many jobs are exploitative. At this point, the state in question comes into play, whereby theoretically, they are the best equipped to supply those parts of the economy and society that are overseen, considering the fact that they were elected for those reasons.

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