Abstract
This is the golden age of philanthropy. Over the 55-year period 1998–2052, bequests to charity in the USA alone are estimated to be between $109 and $454 billion per year. This paper exhorts geographers to give critical attention to less-than-charitable consequences of the so-called ‘new philanthropy’ among the super-rich. It sets out a number of areas that appear to warrant critical geographical inquiry, including: bonds between philanthropic engagement and place; diaspora philanthropy; jurisdictional taxation arrangements favouring the wealthy and super-rich; characteristics of culturally variegated philanthropy; and philanthropy’s geographical links with spaces of exploitation and territories of guilt.
I Introduction
Andrew Carnegie’s (1889: 664) dictum ‘the man who dies rich dies disgraced’ seems to have been taken to heart by many of the world’s super-rich in recent years. It is becoming increasingly common to see headlines recording super-donations, such as ‘Hedge fund chief gives £499 million to charity’ (Armistead, 2009) or ‘Billionaire donates for Washington Monument repairs’ (Zongker, 2012) or ‘Indian tech billionaire donates shares’ (Karmali, 2010). The vast donations of the very wealthy Bill and Melinda Gates Foundation 1 are lauded for bringing health and education innovations to the global community. U2 lead singer Bono’s work towards better health care for Africa as well as that of Scottish billionaire Sir Tom Hunter are celebrated widely.Richard Branson’s commitment in 2006 to spend all of the profits from his rail and airline interests to help deal with global warming has been applauded, as has Michael Moritz’s more recent vast donation to Oxford University (Coughlan, 2012). Perhaps overwhelmed by the spirit of generosity that appears to underpin such donations and even blinded by their magnitude, geographers and, with few exceptions (e.g. Jenkins, 2011; McGoey, 2011; Schervish, 2008), many other social scientists seem to have overlooked critical analysis of the role of these philanthropic acts, their implications and their significance. 2 This essay contributes to the emerging research agenda that encourages scrutiny of significant benefactors of global capitalism – the super-rich – focusing specifically on the less-than-charitable consequences of their philanthropic activities.
In 2004, Beaverstock et al. argued that geographers have been letting the super-rich ‘get away with it’ for years, and more recently Hay and Muller (2012) and Hay (2013) have supported the argument for geographers to give attention to the motivations, aspirations and actions of the super-rich. This paper advances work in this area by focusing specifically on the role of super-philanthropy (philanthropy of the super-rich) and the ways in which the super-rich appear to wield power and wealth. In particular, it sets out a research agenda for more detailed critical geographical work on super-philanthropy. The timing of this discussion seems appropriate given that we appear to be entering a ‘golden age of philanthropy’ (Schervish, 2000: 1; Singer, 2006: 58). Wealth creation of the past 25 years exceeds that of any other era in history and charitable donations in some parts of the world, such as the USA, have increased proportionally (Levenson Keohane, 2008). For instance, Warren Buffett’s 2006 donation of $30 billion to the Gates Foundation is the largest recorded donation in history, eclipsing the charitable donations of John D. Rockefeller and Andrew Carnegie – combined and adjusted for inflation! (McGoey, 2011: 190). More than 80 super-rich Americans – with a combined net worth of about $400 billion – have joined the Giving Pledge, 3 described on its website (http://givingpledge.org) as ‘an effort to invite the wealthiest individuals and families in the USA to commit to giving the majority of their wealth to philanthropy’. It is estimated that this could result in an additional $200 billion going to charity, a figure brought into perspective when compared with the 76,600 grant-making foundations that currently have $646 billion in assets and give $47 billion each year (Fischer, 2012). The prospects for future charitable donations may be even more vast than these huge sums suggest. Havens and Schervish (1999) developed highly credible forecasts 4 that suggest that over the 55-year period 1998–2052 bequests to charity in the USA will be between $6 trillion and $25 trillion – or between $109 billion and $454 billion per year! (depending on real wealth growth and savings rates). 5 A greater demand for philanthropy has been stimulated by 40 years of privatization and curbed spending on social services coupled with decades of unequal growth in wealth (Dorling, 2012a, 2012b; Harrow, 2010: 121). Indeed, following Wolpert (1995: 13), some might argue that the recent era of neoliberalization has obliged greater levels of generosity for ‘if we fail to be generous under these conditions [of free enterprise, limited and federated government, and non-coercive charitable giving], we are admitting to the failings of limited government and encouraging an enhanced public sector role and more entitlements’. Demand for significant philanthropy has been compounded by government budgets straitened as a result of the Global Financial Crisis, and there is a sense that philanthropic donations will need to be used more efficiently than ever before, bringing strident arguments for increasingly businesslike approaches to philanthropy (Bishop and Green, cited in McGoey, 2011: 186). More than this, because philanthropists now find celebrity status (e.g. Bill and Melinda Gates, George Soros, Warren Buffett) and new forms of philanthropy are emerging rapidly, it is increasingly important to understand what is going on (Smith, cited in Fischer, 2012).
This paper’s focus is on philanthropy of the super-rich. It does not deal with philanthropy in general, some of that work being taken up elsewhere (e.g. Havens and Schervish, 2005; Wolpert, 1994). Nor does it deal with issues of corporate philanthropy. This too is work that has been undertaken by others (e.g. Buchholtz and Brown, 2006; Muller and Whiteman, 2009). Despite the emphasis on rich individuals and not on corporations, it is worth observing that many of the global super-rich might be regarded as ‘corporations’ in their own right. Indeed, the resemblance is striking in the case of those serviced by so-called family offices, 6 which centralize the management of the family’s fortune. Through their specialist wealth management services, family offices cut across personal and corporate taxation and other State costs associated with the protection of earnings, profits and capital gains (e.g. from assets, investments, employment, real estate). While this does raise interesting prospective questions such as ‘how does corporate philanthropy connect with ultra-high net worth individuals?’ and ‘do family offices and other private wealth management providers such as Goldman Sachs, Kleinwort Benson and Morgan Stanley offer rich individuals and families corporate philanthropy products and services to enhance their estates’ efficiency and longevity?’, these step beyond the limits that can reasonably be taken up within the constraints of this paper.
Throughout this essay we take seriously the factor of power in relation to super-rich philanthropy and question the unsophisticated assumption that philanthropy results in a benevolent redistribution of money or power. This paper points to the need for geographers to consider this assumption more critically. We outline the nature of ‘super-philanthropy’ and how the super-rich tend to maintain power and control over the funds that they ‘give away’. Like most people, the super-rich prefer to give their funds to familiar causes. This philanthropic architecture tends to benefit those who are already well-off, including the benefactors. More broadly, it is often taken-for-granted that charitable donations are intrinsically good deeds, beyond insensitive scrutiny (see, for example, Gross, 2003; Kotler and Lee, 2005). Because donations and the benefactors themselves are typically held to be beyond criticism and because individuals and organizations dependent on philanthropic donations may be reluctant to look a ‘gift horse in the mouth’, we – as scholars positioned to do so – seek to open philanthropy up to critical geographical analysis. While it is not my intention to condemn super-philanthropy or to produce an analysis that might stifle charitable donations made in good spirit, it is my ambition to stimulate critical analysis and robust debate about the less benevolent consequences of super-philanthropy.
Whereas the essay considers super-philanthropy generally, much of the discussion focuses on the experience of the USA, a country that might be regarded as the current epicentre of philanthropy, with a substantial proportion of the world’s super-rich population, a long-standing culture of support for philanthropy, and a tax regime that reflects and reinforces that tradition.
II The ‘new philanthropists’: architects of charity
While the modern concept of philanthropy has its origins in Europe at the turn of the 17th century when the rich established mutual aid societies and promoted humanitarian reform (Dobrzynski, 2007), changes in the constitution of the ‘new wealthy’, from those who have inherited wealth to those who have made their own fortunes, have seen a move away from the old aristocracy with its noblesse oblige to ‘new philanthropy’ as a means of demonstrating an attitude of wealth with responsibility (Raymond, 2012; Schervish and Havens, 2001). According to Schervish (2008), new philanthropists: are becoming more numerous, have higher net worth at a younger age, and increasingly recognize their financial security; seek out rather than resist charitable involvement; approach their philanthropy with an entrepreneurial disposition; move their giving towards inter-vivos involvements [giving while alive]; plan to limit the amount of inheritance for heirs; understand that caring for the needs of others is a path to self-fulfilment; make philanthropy a key and regular ingredient of the financial morality that they observe and impart to their children; and view philanthropy as a way to achieve simultaneously the happiness of themselves and others.
There is occurring a paradigm shift in philanthropy. Formerly a simple asymmetrical transfer of funds from benefactor to recipient in the form of a gift and with little expectation of accountability, it is now better understood as an investment targeted at a problem, not an (non-profit) organization, with the ambition of supporting specific solutions (Raymond, 2012: 9). With disturbing links to Lawson’s (1997: 1) observation that `we live in times defined by the relentless extension of market relations into almost everything…reaching into arenas where the social good should (but often does not) take precedent over profitability and the efficient operation of markets’ new philanthropists treat giving just as they regard their business and investments, applying their entrepreneurial disposition enthusiastically and giving attention to matters like ‘“rigorous due diligence”, “scalability”, “return on capital”, “leveraging the investment”, “accountability to stakeholders”, “agreed targets”, “excellence in delivery”, “accurately measure outcomes”’ (Henley, 2012; see also Newland et al., 2010: 8). Raymond (2012: 9) puts it clearly: new philanthropists ‘do not see a difference between the way they look at their investment portfolios and the way they look at their philanthropy’. Their background as successful self-made entrepreneurs leads ‘new philanthropists’ to favour greater levels of involvement in charities than those that have inherited wealth: they believe they have more to offer than just money (Lloyd and Tracey, 2004). For instance, they endeavour to organize giving in ways that allow them to control the timing and size of gifts and to vary the recipients over time (Schervish and Havens, 2001: 103). Hyper-agency is the consequence of such thoroughgoing involvement. That is, the very wealthy become producers or architects of charity rather than simply its supporters.
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They want to have some part in shaping the conditions and institutional frameworks within which we live. In extreme cases, they may found a philanthropic project or organization (Schervish, 1997) to help achieve such ends. As one Canadian who set up her own foundation observed, ‘I wanted to find a way to make the donations count…And I wanted some control over where it went’ (Elizabeth Marshall, in Waldie, 2011). SunAmerica billionaires Eli and Edythe Broad approach their grant-making activity with:
much the same vigor, energy and expectation as we did in business. We view our grants as investments, and we expect a return – in the form of improved student achievement for our education reform work, treatments or cures for disease in our scientific and medical research, and increased access to the arts. (Broad and Broad, 2010)
The architecture of new philanthropy is not only linked to commercial domains. It is also bound to public policy. Newland et al. (2010: 18) point out that while independence from government priorities is both a hallmark of private philanthropy and central to its effectiveness in driving change, philanthropy is ‘inextricably linked to public policy, in particular when philanthropists are strategic in their giving and aim to influence the decisions and actions of policymakers’. There are many high-profile examples of such activity. Hungarian-born US financier George Soros set up the Open Society Foundations (formerly Open Society Institute) to shape public policy to promote democracy, human rights and economic, legal and social reform, especially in that that part of the world under the former Soviet sphere of influence. Shakira Isabel Mabarak Ripoll (the recording artist better known by her first name only) established the Barefoot Foundation (Fundación Pies Descalzos) in 1997 to help promote greater access to education among poor children in her native Colombia. According to its website (http://www.fundacionpiesdescalzos.com/barefoot-fundation/index_en.php), the Foundation works to ensure ‘that every child can exercise his or her basic right to a quality education’. Though linked, policy pathways of philanthropy and government generosity are not aligned. Indeed, the relationship between private philanthropy and official aid is said to be complementary, with Kharas and Desai (2009) summarizing the relationship as one in which official aid supports countries and private aid supports people.
III The scale and importance of individual giving
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New philanthropists’ donations are significant and increasing. In addition to Soros and Shakira, many other donors are well known internationally, including Bill and Melinda Gates and Earvin ‘Magic’ Johnson with their eponymous Foundations. The contributions of ‘new philanthropists’ make up a significant proportion of overall giving to charities (see Waldie, 2011). High net worth households contribute between 65% and 70% of all individual giving in the USA, and between 49% and 53% of giving from all sources, which includes giving from corporations, foundations, and living and deceased individuals (Center on Philanthropy, Indiana University, 2010: 6). In the USA, the ‘wealth transfer from final descendants to heirs, government and charity for the period 1998–2052 will be $45 trillion, $6.6 trillion of which will be in the form of charitable bequests’ (Schervish, 2005: 16). The estimate of bequests rises to between $21 trillion and $55 trillion (at 2002 spending levels) between 1998 and 2052 when charitable bequests and inter-vivos donations (giving while living) are included. Over the 20-year period from 1998 to 2017, the amount given to charities is expected to be between $5.5 trillion and $7.4 trillion. This is a vast sum, put into some perspective by comparison with US federal spending for the fiscal year 2012 – including defence, Medicare/Medicaid and social security – budgeted to total $3.7 trillion (US Government, 2011). It is possible that the Giving Pledge project announced by the Gates and Warren Buffett in June 2010 has the potential to increase donations of billionaires alone up to $600 billion. 9 ‘[A]s the level of wealth increases, so do both the amount and the percentage of income contributed to charity’ (Schervish and Havens, 2001). 10 In many countries, ‘competitive philanthropy’ appears to be taking hold, seeing the super-rich striving to match or better the donations of their rivals 11 (Dobryzynski, 2007). Recent US research involving 20,000 high net worth households, each with investable assets in excess of $3 million, found that 98.2% donated to charities making an average donation of $54,016 in 2009 (Center on Philanthropy, Indiana University, 2010). An earlier study in the USA involving households with a net worth over $5 million found that the average annual charitable contribution amounted to 22% of family income (Schervish and Havens, 2001). In Australia, individual taxpayers with taxable incomes in excess of $1 million also have a record of making substantial tax-deductible donations – though rather less than their US counterparts – with more than 60% increasing those donations from 1.29% of their income in 2000 to 3.01% in 2005 (Stovold and Thorn, 2007). In the UK, the wealthy typically donate 0.5–0.8% of their investable assets to charity (Henley, 2012). While US and UK philanthropy is perhaps most commonly reported, super-philanthropy is growing around the world; and, given the prospects of global growth of the super-rich population, 12 especially in the world’s emerging economies (Capgemini and Merrill Lynch, 2011; Newland et al., 2010: 6), the future seems bright.
The role of individuals in charitable giving has been underscored by work published in the Journal of Public Economics. In an extensive and thorough study of charitable giving in 147 US cities over the period 1989–2002, Card et al. (2010) found that the presence of a corporate headquarters has a significant effect on giving to local charities, yielding $3–10 million per year in additional public contributions to not-for-profit organizations. Yet when interrogated further the data revealed that ‘most of the increase in charitable contributions arises from an effect on the number of highly-compensated individuals in a city, rather than through direct donations by the corporations’ (Card et al., 2010: 223). In short, very well remunerated individuals, rather than corporations, are a critical source of philanthropic donations in the USA.
IV Questioning generosity geographically
For geographers, there is much to consider in this new golden age of philanthropy. The mere scale of donations is enough to merit significant consideration of the deceptively straightforward questions of where, how and to what effect philanthropic funds are being distributed. The implications of new philanthropists’ application of business models to charitable work raises additional questions. As Harrow (2010: 126–127) observes, ‘the continuing linkage with business as the resource base of philanthropy…causes wariness…in the wider sphere of civil society, with its non-market rationale’. However, there is very much more to take into account than this. For instance, Schervish (1997: 99) observes that ‘donors contribute the bulk of their charitable dollars to causes from whose service the donors directly benefit’. In consequence, the greatest portion of giving is ‘local’ and to causes with which the donor is familiar. When the super-rich become hyper-agents of charitable donations, they shape as well as contribute to causes. Schervish goes on to demonstrate that together these factors ensure that donations are skewed towards the interests of the super-rich, either personally or through their exposure to particular issues – a topic to which we return later in this paper. What impact does this have on inequality, particularly when donations rival national government expenditures in scale yet have no overarching organization to ensure the equitable, or even moral, distribution of funds? What happens to those charities, trusts, groups and individuals with which the super-rich cannot, will not or do not ‘engage’? The discussion that follows takes up these and other issues.
1 Engagement and place
McGoey (2011: 193–194) takes a critical look at philanthrocapitalistic ‘gift-giving’, drawing from Mauss (1990) to remind us that, rather than being separate from economic motives, gift exchanges are often tied to various social and economic expectations. As wealthy individuals become self-aware of their financial security and seek to limit the amount that their heirs will receive – perhaps taking Carnegie’s pronouncement to heart – they come to regard philanthropy as a mechanism for creating happiness and for teaching morality to their children. However, ‘the strongest immediate determinant of charitable giving is the level of formal or informal engagement’ (Schervish, 2000: 12). That is, the super-rich tend to make donations to causes with which they identify personally or which somehow offer direct benefits – a ‘consumption philanthropy’ (Schervish, 1997: 99). Schervish and Havens (2001: 102) have observed that, ‘like everyone else, wealth holders exhibit a pattern of care that radiates from self and family to community and society’. Although these depictions are of social engagement, the associations with one’s place or home domain are self-evident and borne out by the philanthropic activities of many of the super-rich. For instance, in his Giving Pledge statement, Georgia-based Home Depot billionaire Arthur M. Blank noted his eponymous Foundation’s work to fight childhood obesity in Georgia, to develop a community-wide network of paths, parks and public transport called the Atlanta BeltLine, and to encourage the state of Georgia to spend more money on childhood education (Blank, 2012); and co-founder of Microsoft Corporation Paul G. Allen observes that his Foundation ‘has focused its philanthropy in the Pacific Northwest [of the USA], where I live and work’ (Allen, 2010, emphasis added). So, if super-rich philanthropists do indeed give ‘locally’, it matters where they are.
In pioneering work on the geographies of generosity in the USA, Julian Wolpert (Wolpert, 1988; Wolpert and Reiner, 1984) observed that patterns of support for worthy causes may be linked to differences in regional values, as manifested in community polity and civic commitment. As he remarked, ‘place and context matter in donor behaviour’ (Wolpert, 1995: 11). Despite that observation, even two decades after Wolpert’s work, the links between location and giving remain unclear – and warrant some examination. For instance, a large-scale 2012 study of US tax records conducted by The Chronicle of Philanthropy reveals that charitable donations are less in localities where wealthy people are clustered than they are in lower-income or more heterogeneous areas:
when wealthy people are heavily clustered in a neighbourhood – meaning that when households making more than $200 000 a year account for more than 40% of the taxpayers – the affluent households give an average of only 2.8% of discretionary income to charity. (Gose and Gipple, 2012)
2 Place dependence on philanthropy
In some jurisdictions, the significance of philanthropic donations for the viability, attractiveness and even the character of places is truly noteworthy. Card et al. (2010) point out that in the USA:
over one-half of all hospitals, one third of colleges and universities, and the vast majority of cultural institutions are tax exempt non-profits that rely on charitable donations as a major source of income. These organizations in turn contribute to the social capital of a city, helping to attract new residents and in many cases defining the package of amenities that people associate with a city. (Card et al., 2010: 222)
3 Diaspora philanthropy
Plainly, philanthropic behaviour is not confined to specific jurisdictions. Funds flow from one part of the world to another, perhaps to places where need is seen or to places where philanthropists have family and other ties. There is, for instance, a growing literature on diaspora philanthropy (e.g. Baker and Mascitelli, 2011; Garchitorena, 2007; Kharas and Desai, 2009; Najam, 2006), giving attention to the individuals and groups of philanthropists who operate at a physical distance from one another but who have shared values with recipient countries. In their discussion of diaspora philanthropy, Newland et al. (2010) discuss three realms which apply more generally to cross-border philanthropy. First is the new and practically significant role of philanthropists and other non-governmental actors in shaping and enacting development policy. Second is the greater emphasis being given by philanthropists on strategic beneficence intended to bring about specific forms of change. Some super-philanthropists have such resources and connections that they can select and shape causes. Third, heightened levels of mobility, new and effective telecommunications technologies, and growing numbers of wealthy diaspora members and super-philanthropists have combined to intensify such philanthropic activity. For instance, the internet allows groups of donors more easily to collaborate on a single project or cause.
While diaspora philanthropists and philanthropists working at a distance have: (1) rapidly mobilized humanitarian relief after natural disasters and anthropogenic crises; (2) acted as social innovators and change agents with a long-term interest in improving developing country living standards; (3) served as powerful aggregators of issue-based or identity-based giving among diaspora communities; and (4) advocated for country-of-origin causes among mainstream donors (Newland et al., 2010: 15), their objectives and ambitions do not necessarily coincide with those of intended beneficiaries – even in the case of diaspora philanthropy. Their endeavours may not accord with – or may even contradict – broader development strategies and initiatives, although economists Raj Desai and Homi Kharas of the Brookings Institution have argued that in the case of the USA private aid flows ‘better reflect the foreign aid priorities of that nation’s taxpayers’ (Newland et al., 2010: 22). New philanthropists may also be happy with band-aid programmes, which can be emotionally satisfying for them but offer little long-term effectiveness (Garchitorena, 2007). While they may have some credibility associated with either their wealth or their prior associations with a place, (diaspora) donors may not possess the perspective and credibility of an objective outsider (Newland et al., 2010: 17).
4 Favouring ‘culture’ and education
Philanthropy is often criticized for the tendency of philanthropists to fund their own. As Harrow (2010: 132) makes clear: ‘Support for beneficiaries in the same work group or social class, or for co-religionists or political sympathizers, has been a hallmark of some kinds of philanthropy’. Odendahl (1990) has examined the giving patterns of the philanthropic elite and found that the very wealthy tend to support elite colleges and universities 13 and cultural institutions. H.F. ‘Gerry’ Lenfest serves as an example. Having made a $1.2 billion fortune through his cable television company, Lenfest vowed in 2000 to give most of his fortune to charity. Of the $800 million that he had donated by 2010, a significant proportion had been given to the established education institutions of which he is an alumnus, such as Columbia Law School, Washington and Lee University, and Mercersburg Academy (Loomis, 2010). Elsewhere in the USA, Eli and Edythe Broad have given large sums of money to MIT and Harvard to establish the Broad Institute (Broad and Broad, 2010). In 2012, David Rubenstein, who made his fortune as co-founder of a Washington DC private equity firm, The Carlyle Group, gave $15 million to his alma mater, Duke University, for an entrepreneurship programme. This followed an earlier gift of $13.6 million for the same university’s Rare Book, Manuscript and Special Collections Library and more than $80 million of donations in the past five years to museums and art institutions across Washington DC ( WRAL TechWire, 2012).
Leslie Lenkowsky and his team from Indiana University have also researched the giving patterns of those wealthy people making donations of over $1 million in 2004 and 2005 in the USA. The team’s findings demonstrated that almost all of these super-donations went to schools of higher education, hospitals and medical centres, with substantially lesser amounts going to cultural and art institutions:
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No money went to grassroots organizations, to reproductive rights organizations, to local community health centres, to domestic violence centres, even to social service organizations…When you look at all the grants that went to higher education, only two actually were targeted to scholarships for needy kids. And as theamount of money given away by very wealthy people expands almost exponentially these days, less and less of a proportion of needy recipients will get that money, thereby expanding the inequities in philanthropy…Two thousand foundations have sprung up in wealthy school districts to give money to supplement the budgets in these already wealthy districts. No such foundations, or few foundations, have arisen in poorer or really destitute school districts. Again, this is an instance where philanthropy perpetuates the inequities in our system. (Pablo Eisenberg, in Hudson Institute, 2008: 18)
5 Tax, inequality and power
First, the level of giving, the specific causes to which philanthropic donations are directed, and philanthropy’s local, regional and international flows appear to be linked to tax burdens and structures in different jurisdictions. For instance, Newland et al. (2010: 2) observe that philanthropy is not only driven by a raft of personal and social factors, but is also encouraged or discouraged by public policy and tax regimes in both donor and recipient jurisdictions. Factors such as matching grant programmes and the regulation of charities can be significant influences on the shape of philanthropic action. They also note a relationship between the level of giving and tax structures: ‘Large-scale individual philanthropy is driven by a relatively low tax burden for high earners…while small-scale philanthropic donations appear less dependent on the tax structure’ (p. 19). In short, how and to what level philanthropy manifests itself is linked to different policies in different places.
Second, as a result of jurisdictional taxation structures, philanthropy comes at considerable cost, both financially and socially. Estimates of the costs of charitable deductions to the US Treasury for the period 2012–2016 stand at $305 billion (Budget of the United States Government, 2012: Table 17-1). The income tax foregone in 2012 is $52.9 billion, a sum put into perspective by comparisons with the $3.3 billion dedicated to the School Breakfast Program, $3.21 billion for Unemployment Insurance, or $17.7 billion for TANF (Temporary Assistance for Needy Families), one of the USA’s largest welfare programmes. Despite this flow of funds out of the public purse, and in stark contrast to mid-20th-century state welfare expansion, ‘governments are championing increased charity in areas where state support was once pronounced’ (McGoey, 2011: 195).
But more than this, in countries such as the USA charitable tax deductions can disproportionately benefit the well-to-do, thus widening the inequality gap! Stanford political science professor Rob Reich’s (2005) research demonstrates, for instance, that more charitable dollars flow to private schools or public schools in well-off areas rather than assisting schools in disadvantaged poor areas. In jurisdictions such as Australia, the UK and the USA, tax deductions for charitable contributions are subsidized at the same rate as the income tax that a person would have been charged (Productivity Commission, 2010: G.5). Therefore, wealthy benefactors are effectively subsidized at a higher rate for their charitable tax deductions than are lower-income donors. For example, a taxpayer in a 48% tax bracket would save $48 from a $100 donation compared to a $15 in $100 saving for someone on a 15% tax bracket. According to Fleischer (2010), this system allows higher-bracket taxpayers greater influence over public policy by controlling more subsidy dollars.
In his study, Reich (2005) uses the example of the Woodside School Foundation, established by a rich suburban school in the USA, to highlight the inequitable impact of a tax deduction. The Foundation’s mission is ‘to provide a dependable flow of funds to supplement the budget at Woodside School’ (Woodside Elementary School District, 2011). It raised approximately $10 million between 1998 and 2003, and the majority of households that contributed to the Foundation were in the top tax bracket. If the government had not allowed these donations as tax deductions, it would have collected $3.5 million for the public purse. Effectively, the Federal Government subsidized the Foundation, and therefore the school, to the tune of $3.5 million. Reich (2005) makes the point that tax incentives for philanthropy are therefore ‘a kind of spending program or tax expenditure’ which has an effect on the annual budget. ‘Seen in this light, tax incentives for philanthropy amount to state subsidies for the individuals and corporations who make charitable donations’ (Reich, 2005: 28). Funds that might otherwise go to the ‘public purse’ for (re)distribution by (democratically elected) governments are directed instead to causes selected by donors. This is a matter of widespread significance given that most OECD countries allow individuals to deduct charitable contributions from taxable income, either in full or part (Roodman and Standley, in Newland et al., 2010: 19).
The causes to which funds are directed is a matter of importance, particularly given that there is little or no discrimination in the charitable causes supported through taxation concessions on donations. Madoff (2010) introduces the point:
charitable gifts – both during life and death – are examples of tax expenditures. They are functionally the same as other expenditures by the government – like payments for Medicare and Medicaid, early childhood education programs, or weapons defense programs. The difference is that unlike these traditional government expenditures that are subject to the democratic legislative process, the tax expenditures under the charitable deduction are not. (Madoff, 2010: 958) the question becomes: Do charitable donations flow more sharply downward than would government spending? In other words, does philanthropy do a better job of redistributing wealth than the state would if it had fully taxed the charitable donations in the first place? Answering this question is extremely difficult, but at least it is the right question, for this is the standard the sector must meet: It must be more redistributive than the state would have been. Given the evidence already presented, philanthropy does such a poor job of channelling money to the needy that it would not be difficult for government to do better…If the massive tax subsidies given to philanthropy do not enhance equality, then either the political regulation of philanthropy will have to change, or the justifications for state-supported philanthropy will have to lie elsewhere. It is very possible that justifications do lie elsewhere, but we should then stop kidding ourselves that charity and philanthropy do much to help the poor. (Reich, 2005: 30–33)
6 Intra- and inter-jurisdictional taxation issues
One set of related matters largely unaddressed in the considerations of philanthropic tax subsidy fairness discussed above are those involving inter-and intra-jurisdiction taxation flows. These present a challenging and provocative series of questions with more or less geographical significance. First, is it more equitable and beneficial for a national government, for example, to encourage philanthropy among its wealthy citizens through a taxation system benign to donations or is it better to secure heightened taxation revenues from those philanthropists? In the case of donations made to foreign causes, no matter how worthy, the jurisdictional losses could be significant. This challenges us to consider the literal costs of `caring at a distance' (e.g. Silk, 1998; Smith, 1998, 2000).
Second, what differences would it make to a specific jurisdiction’s tax returns if the super-rich were to receive no concessions for philanthropic donations? And if such concessions were to be removed by a brave – or foolhardy – government, what might be the revenue consequences if the super-rich are dislodged and opt to relocate where their donations are subsidized? Recent exploratory work on international mobility of the super-rich suggests that the consequences might be quite minimal. As Sanandaji (2012: 7) observes: ‘Taxes matter, but do not appear to be a major determinant in the international migration of the super-wealthy, simply since most billionaires never move.’
Third, in jurisdictions where philanthropic donations are subsidized, to what extent are (sometimes poor) tax payers in those places underwriting donations to other jurisdictions? What equity issues does this raise? Arguments about the injustices of philanthropic donations supported through taxation systems are of long standing (see Lundberg, 1968), and leading financial planners argue that philanthropy is ‘the only significant tax shelter for the very wealthy’ (Schervish, 1997). As observed earlier, one of the consequences of philanthropy as tax relief is that charitable funds may be directed to causes selected at the discretion or whim of the super-rich rather than to consolidated revenue. Without any strategic or overarching coordination, just where do these trillions of donated dollars settle (Hay and Muller, 2012)? What happens to commendable, yet less attractive, less accessible, and poorly apprehended causes? What long and short-term impacts has the tendency for donations to be skewed towards the interests of the super-rich created?
Fourth, how might tax returns and philanthropic transfers vary if the super-rich paid more tax in their places of residence and work?
While such work on philanthropy and intra- and inter-jurisdictional taxation issues would be surrounded by substantial technical problems, there can be little doubt that such calculations would be both enormously interesting and politically potent.
7 Varieties of philanthropy: variegated philanthropy?
Although levels of philanthropic activity may vary from place to place as a result of tax structures and other regulatory mechanisms, philanthropy is an activity whose spatial variations are also linked to other influences that warrant geographical examination. First, philanthropy often has strong moral, ethical and emotional dimensions – including civic anger (Silber, 2012). Given that morality and understandings of ethical conduct vary tremendously from one society to another – as well as within cultures (Lee and Smith, 2004; Proctor and Smith, 1999; Tronto, 1993) – it seems self-evident that there will follow place-based differences in philanthropic activity. Indeed, as Ostrower (1995) observes in her study of elite philanthropy in the USA, philanthropy is regarded as an obligation among particular groups (e.g. New York elite). In the small amount of earlier work by geographers on philanthropy, some attention has been given to the regional-level influence of values and norms upon philanthropy (Wolpert, 1988; Wolpert and Reiner, 1984). Yet it would appear that there has been little or no geographical research 16 examining prospectively interesting differences between national or cultural/religious values in relation to philanthropy.
Second, notwithstanding the caveat made at the outset of this paper that much of its discussion is based on the experience of the USA, focusing on so-called Anglo-Saxon countries may limit our understandings of super-philanthropy to a narrow range of capitalist countenances (e.g. western neoliberal). To what extent are particular expressions of philanthropy enmeshed with the reproduction of, say, national or regional varieties of capitalism such as those of Silicon Valley, Germany, the Nordic countries or China? Perhaps at a more nuanced level, how does understanding the role of philanthropy figure in advancing multiscalar understandings of a more relational, variegated capitalism? What role does philanthropy serve, for example, in diverse contemporary expressions of neoliberalization? Given the growing and potential significance of countries as varied as Brazil, China and Indonesia as homes to the super-rich (Knight Frank, 2013), together with the growing interpenetration of dissimilar capitalist systems, these are matters of clear import apparently absent from the `varieties of capitalism' literature (for useful discussions, see Peck and Theodore, 2007; Peck and Zhang, 2013).
8 Conscience, place and inequality: spaces of exploitation; territories of guilt
Philanthropists are central to some societies’ toleration of inequalities associated with the super-rich possessing a disproportionate share of the economic pie (Irvin, 2008). This is a particularly popular argument in the USA where, for example, many galleries, museums and other public institutions are funded – and named in honour of – their wealthy benefactors (e.g. Carnegie Libraries, The J. Paul Getty Museum). But, of course, many great fortunes have been won with equally great ruthlessness. While Andrew Carnegie may have given away vast sums before his death, his steel empire violently resisted steel workers’ unionization attempts (e.g. Homestead Strike of 1892). John Pierpont Morgan is known widely for his cut-throat capitalism in the late 1800s. As Brands (2010: 620) so colourfully observes, Carnegie ‘never quite washed away the bloodstains from the Homestead debacle, although the $350 million he gave away to literacy, world peace and numerous other causes bought him as much earthly forgiveness as a man could ask’; and ‘like Carnegie, Rockefeller sought absolution by lavish philanthropy’. For many other super-rich who have made or consolidated their fortunes on the stock market, it is imaginable that they may not have made such great fortunes had they chosen to invest only in companies with unblemished ethical records. Certainly many of those who have become great philanthropists turn to philanthropy to salve their conscience, or to build public trust in their name (Irvin, 2008; Ostrower, 1995). This alerts us to spatial dimensions of exploitation-related shame and guilt and their links to philanthropy.
People tend to favour those to whom they feel close (e.g. family, friends) and have been shown to offer them higher compensations in the case of transgressions (Wellman and Wortley, 1989). As recent work in ethics shows (Ghorbani et al., 2013: 321), ‘guilt can predict transgressors’ tendencies to compensate victims’ and ‘shame interacts with psychological proximity to predict compensation’. Arguably, shame and guilt are emotions with spatial as well as psychological extent, being most powerful amid those people and places with which we are most closely bound. It therefore follows that super-rich philanthropists experiencing guilt or shame for how they made their fortune, or for their vast wealth relative to poor others, may make charitable donations within territories of beneficence that radiate across domains with which they experience some kind of connection. While the extent of territories of guilt might be expected to match the spaces of exploitation from which fortunes were derived (e.g. local industry, global enterprise), and the spaces of shame to be a little closer to home, connected more intimately to benefactors’ social networks, these relationships between emotion, philanthropy and space bear scrutiny. So too do the links between donations based on shame and guilt and those based on engagement with place discussed earlier in this paper, these perhaps being rooted in other ground such as childhood memories or familial associations.
If these premises about guilt, shame and philanthropy are indeed valid, they suggest that philanthropic outgrowths of emotions buttress the neoliberalizing tendencies of philanthropy. In short, a deeply personal set of emotional drivers may reinforce the more commonly understood profit-seeking, ideological and regulatory dimensions of neoliberalization (Harvey, 2005).
V Conclusion
Very many do not realize that you must be just before you are generous. (Attlee, 1920: 58)
The worlds of the super-rich have attracted limited critical research from geographers despite the awe and curiosity – and perhaps a little envy – that draw broader public attention. This paper has sought generally to support emerging geographical work on the super-rich (e.g. Hay and Muller, 2012; Pow, 2011) and to contribute specifically to critical academic discussion on philanthropy. Arguably, philanthropy has entered a new golden age in which the donations of super-rich ‘new philanthropists’ are substantial and peer pressure is being placed on the very wealthy to give away their fortunes through the Giving Pledge, for instance. Not only does the sheer size of their contributions make the super-rich architects of charity, but the entrepreneurial disposition that philanthropists increasingly bring to giving lends particular shape to charitable landscapes and political-economic systems. In this golden age of philanthropy, it seems vital that geographers trace and interrogate critically the distribution and significance of donor activity.
As set out in this paper, there are at least eight distinct domains in which critical geographic research can contribute to debates on philanthropy. First, over and above consideration of the redistributive character and qualities of philanthropy, ‘what goes where, from whom, and who misses out?’, we also need to conduct research on the knotty links between place and philanthropic activity. Just what are the connections between location and giving? Do super-philanthropists give locally, in places they call home, or is that relationship more nuanced? Second, in examinations of place-dependence on philanthropy, we might explore the significance and consequences of large philanthropic donations to the vitality and amenity of cities and regions. How do donations support social capital and to what extent do territories and regions seek out or depend on philanthropy for their well-being? Third, there may be value in considering the potentially contentious philanthropic activities of diaspora in an era when effective telecommunications technologies have helped to intensify this form of philanthropy. Although it may offer short-term satisfaction to donors, just what is the long-term effectiveness of diaspora philanthropy, and how does diasporic beneficence sit against both the aims and ambitions of local residents and the broader development strategies of governments and aid agencies? Fourth, let us shine some light on the tendency of super-philanthropists to favour cultural and educational institutions with which they have prior associations, in effect funding ‘their own’. It seems clear that critical attention needs to be directed at the apparent charitable generosity of the super-rich. Some element of this scrutiny should be accompanied by more than a little scepticism about donors’ underlying motives. For instance, how much of the ‘new philanthropy’ is actually a clever way of avoiding higher taxation (which, arguably, might have superior positive distributional consequences)? Does some of this philanthropy come with such ‘strings attached’ that donations are better construed as investments intended to achieve economic, political, cultural and other forms of outcome that align with the giver’s ideological and social position? Flowing from this is point five, which calls for examination of the complex relationships between philanthropy, territorial tax structures, and social and spatial equity. How and to what level does super-philanthropy manifest itself in different taxation jurisdictions? To what kinds of causes do tax-deductible super-philanthropic funds go, and what is the extent and implication and any associated diminution in taxation revenue? Are donations going, for example, to schools and other services in disadvantaged poor areas? Or do they support those who are already well-off? Sixth, how do intra- and inter-jurisdictional taxation frameworks shape the flow of donations and taxation revenues from one place to another? What differences might be made to the funding of local spatial and social policies if philanthropic donations to other territories were no longer offered taxation concessions? What losses accrue to local residents and causes where a taxation system is favourable to interjurisdictional donations? Seventh, we might look carefully at varieties of philanthropy – working from the scale of the city, for example New York, to the scale of different national/regional expressions of capitalism – including its different meanings and significance, as well as how philanthropy might figure in richer understandings of variegated capitalism. Finally, there is scope for geographers to give attention to philanthropic behaviours in what we have characterized here as spaces of exploitation and territories of guilt. Do emotions such as shame and guilt (or perhaps even pride) figure in the spaces over which super-philanthropic behaviours extend? Are there connections between these emotions and the political economy of neoliberalism?
More broadly, and to conclude, perhaps we should also be asking about the extent to which super-philanthropy is diverting attention and resources away from the failings of contemporary manifestations of capitalism. What happens if philanthropy fails to resolve the problems that it does take on? Ironically, the ‘solution to failed philanthropy is more of it; the failure of philanthropy is its success’ (McGoey, 2011: 196) – a problem that is exacerbated by governments’ growing relinquishment of their historical responsibilities and increasing reliance on philanthropic acts.
Footnotes
Acknowledgements
We would like to thank Clive Forster and three anonymous referees for their helpful ideas on earlier versions of this paper.
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.