In economic terms philanthropy is the voluntary redistribution of wealth. We take from ourselves and give to others.
Philanthropy frees the super wealthy from the demands of shareholders to use their financial and intellectual gifts to work on solving society's problems more innovatively than the governments charged with that responsibility.
Philanthropy: A benevolent byproduct of capitalism
By Russ Wigh
The A Team has issued a challenge. Warren Buffett and Bill Gates have lined up 40 of America's richest people to pledge at least half their fortunes to charity.
So far they have commitments for a cool $115 billion. However, there is at least one influential leader of a charity who objects.
Too much, charges Kimberly Dennis, CEO of the Searle Freedom Trust in an August article in the Wall Street Journal.
Dennis argues that these innovative, entrepreneurial billionaires would reach many more people and do much more good for society by reinvesting that money in their businesses to continue the flow of ideas, products and new jobs that created their wealth in the first place.
Support for Dennis' argument is evident in a novel approach taken by Vinod Khosla, founder of Sun Microsystems and now a venture capitalist in California.
Khosla, whose fortune already exceeds $1 billion, combines concern for the poor with the profit motive. His investment in SKS Microfinance, a micro-lender to poverty-stricken women in rural India, has already returned more than $100 million to him.
His profits will be plowed back into other social welfare efforts in his native country, and he hopes to set an example for India's newly wealthy to follow.
But corporate altruism has limits, and SKS has received criticism on two fronts - enriching the original shareholders who started the company in 1997 as a nonprofit and, after conversion to a for-profit enterprise, making a profit on the backs of the poor.
Public companies (SKS is public in India) are of necessity run by a management team to benefit the owners. Corporate social responsibility is limited by the need to maximize shareholder value.
This model is dictated by a competitive market economy.
If corporations were expected to include social welfare as part of corporate business strategy, it would inevitably result in an extra layer of expense. That would just as inevitably result in higher prices to the consumer or lower profits for the owners and ultimately the boot for the management team.
The only way the capitalist system could be altered is through legislation, a really stupid idea. The alternative is the personal philanthropy of those who have prospered in the system, a really good idea.
Philanthropy frees the super wealthy from the demands of shareholders to use their financial and intellectual gifts to work on solving society's problems more innovatively than the governments charged with that responsibility.
In a more perfect world I fantasize that Congress awoke one morning and collectively realized the merit in privatizing the social welfare system by setting up a charity funded by lawmakers and run by this great talent.
How much of the $762 billion expected to be spent by the U.S. government and the various states in 2010 might we save?
In economic terms philanthropy is the voluntary redistribution of wealth. We take from ourselves and give to others.
Taxation is the involuntary redistribution of wealth. Governments take from us and provide services and give to others.
One of the defining characteristics of charities, foundations and corporations in business for the public good is that they often perform functions the government would otherwise have to provide.
It should go without saying charities can do a better job at distributing services than state or federal governments because political issues are greatly diminished.
Well, in theory it is supposed to work that way.
A recent example of political meddling with philanthropy has to do with the popular Georgia special license plate. Prior to May 2010, if you bought a special plate to support a particular interest such as non-game wildlife preservation, the entire fee beyond the standard cost of a license plate went to the cause you selected.
As of May the state legislature mandated higher fees, now $80, plus a $35 annual renewal tab tacked on to your ad valorem tax. Now only $22 goes to the cause each year.
Apparently the General Assembly cannot abide not controlling all the money coming into state agencies. At the same time the legislature stumbled onto a way to weasel an additional tax out of those of us with benevolent intent.
Surprise!
Russ Wigh is a professor of business at Savannah College of Art and Design. He may be contacted at rdwigh@bellsouth.net.
Read more at savannahnow.com
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