Willy Diddens on why philanthropists think they have to evade tax.
Call it branding, public perception, corporate image or optics, ultimately the great majority of people, businesses, governments spend a great deal of time and effort to be seen as good. That’s not just good performers, but also good in a philanthropic sense – kind, generous, compassionate and even altruistic.
After the Industrial Revolution industrial entrepreneurs entered the field of altruism; the scope of doing good things was expanded to include long-term goals, having a broad geographical impact and diversifying into charitable activity. The mission of the Rockefeller Foundation sums it up: “to promote the well-being of humanity throughout the world”. Charity became philanthropy.
Nowadays a new category of philanthropism has arisen among the billionaires who amassed unprecedented amounts of money during the past decade of untethered financial capitalism. These new philanthropists act in a changing context where, on one hand, the conventional economy seems subordinated to the rules of financial markets, while on the other hand enterprises are increasingly held to account by investors on environmental, social, and corporate governance (ESG) grounds.
A new category of philanthropism has arisen among the billionaires who amassed unprecedented amounts of money during the past decade of untethered financial capitalism.
The importance of those immensely wealthy individuals to the achievement of the Sustainable Development Goals of the UN is well acknowledged. For example, the OECD has stated: “Private philanthropy is reshaping the development landscape like never before.” It considers the philanthropic contribution to be modest (about 5% of the official development assistance) but the data are incomplete as several philanthropic foundations don’t share the relevant information.
What are the motives of these new actors? It is becoming increasingly clear that they are not restricted to the traditional ones, but that they advance into domains formerly reserved – but often not occupied – by nation states and international organisations.
Bill Gates increased his influence in the World Health Organisation (WHO) when the main contributor, the USA, suspended its contributions. Even matters of war and peace have suddenly become a subject of philanthropic involvement. Elon Musk has offered substantial technical support to one party in a European war, assuming that he was therefore entitled to put forward a peace proposal to end that war.
Critics of these philanthropists point out that their commitment is purely personal and doesn’t involve their businesses. The corporations they run hardly meet ESG-standards.
Warren Buffett has said his business investments need to create shareholder value, and social and political concerns should be left in the hands of individuals. You may argue that this decoupling prevents the mingling of business and philanthropic interests.
Warren Buffett has said social and political concerns should be left in the hands of individuals.
In November 2021 Elon Musk donated $5.7bn to an unknown charity. It fuelled speculation that it was meant primarily to significantly reduce Musk’s massive tax bill. One year later it turns out that the recipient was his own foundation. The Musk Foundation has been heavily criticised, as well. By the end of fiscal year 2020, the foundation had donated only about $23 million of a then available $1 billion. The rest remained unused.
But being a philanthropist isn’t the exclusive privilege of billionaires.
Effective altruism (EA) is a movement that aims to maximise the positive impact that an individual or organisation can have when making decisions on charitable or philanthropic interventions. It has a strong moralistic approach that leads followers to pledges for lifelong involvement in EA. The founders of EA might well have been strongly influenced by philosopher, Peter Singer, when he argued that saving the life of a child from famine in Bangladesh has the same moral urgency as saving a child in front of you from drowning.
EA has an extreme utilitarian approach that goes as far as suggesting what career path its followers should follow. Being a banker is a better choice than, say, a teacher, because a banker will earn more money and be capable of a higher altruistic impact.
EA has gained significant attention and support in recent years, with a growing number of organisations and resources dedicated to research, promotion and implementation of its principles. These include Giving What We Can and the Centre for Effective Altruism – both linked to the University of Oxford; and Give Well and Open Philanthropy Project in the USA. Entrepreneurs like Elon Musk are supporters.
In 2010 Bill Gates and Warren Buffet founded a movement of billionaires – The Giving Pledge. Its members commit to give the majority of their wealth to philanthropy either during their lifetimes or in their wills.
By 2022 their number reached 236. This enormous, amassed wealth, lying ready to be put into action, might be expected to be discouraging for EA exponents as their efforts look all but irrelevant. But a pivotal element of EA is tax avoidance (see box The critical trio).
Due to its wish to measure and quantify impacts, EA has to fragment the problems of our planet and society into measurable entities. Long lists of funds, clustered by activities and ranked according to cost-effectiveness are the result. Fights against malaria and for animal welfare are high ranking while systemic aspects will be absent.
EA relies on growth. You must earn more money to provide funding for more projects that will mitigate or solve more problems. Doing less and “degrowth” are concepts that can’t easily be aligned with EA. Here again, a more fundamental analysis of the causes of the problems addressed are hindered by the EA concept itself.
A pivotal element of Effective altruism is tax avoidance .
We are at the threshold of a new age that is putting our political system under severe pressure. It is threatened not only by authoritarian ideologies, but also by the loss of democratic control over technological and economic developments.
In the field of the economy, financial capitalism has created a small group of immensely rich and powerful people. And technology hands them power that outstrips that of their historic counterparts to the point where they are able to enter undertakings formerly reserved for nation states – like the conquest of space.
So while some among them provide a force for good, others take their power a step further: they advance replacing democratic dialogue by “philanthropy” when deciding what is good for our planet. It is revealing that experts feel the need to call for a moratorium on the development of artificial intelligence.