Blessed are the...


Bill and Melinda Gates have for many years run a major charitable foundation into which, at the outset, they put $31 billion.  Warren Buffet, the ‘Sage of Omaha’ and one of the richest men in the world is a trustee of the Gates Foundation and promised in 2006 to give 85% of his fortune to it. This will ultimately cost the American tax-payer the amount of estate duty which would otherwise have been payable had these vast amounts gone to their heirs. Since that promise, payments by Buffet have been made in annual tranches of $1.5 billion. They are though conditional upon Bill and Melinda Gates continuing to run the foundation. The secret of Mr Buffet’s incredible success as a professional investor is always to make his money work hard - and that requires good ideas and the best management you can get. The same principles apply to running charities. Obviously the Gates represent to Warren Buffet the best that’s available. Which is hard to argue with. And so this mega-foundation will ultimately have double its original worth. Currently it is worth in excess of $40 billion and is able to make grants of over $3 billion per year. This means that on its own it is able to tackle some of the biggest and most intractable problems the world has. As some measure of its importance, it now has the same disposable income as the World Health Organisation.

Accordingly, the Foundation can take forward its plans to finance improved education and the finding of cures for illnesses predominating in the third world, such as malaria. It has already been instrumental in the abolition of polio around the world.  Many of the illnesses need drugs for the development of which there is no profit motive amongst the drug companies.  After all, the poor of the world simply cannot afford to pay the prices which the drug companies normally demand for new drugs. The Gates Foundation instead finances research by the drug companies themselves in order to have their undoubted expertise, but at the same time ensuring that the new drugs produced are affordable. There are though, those who would question the priorities of the Foundation – should it be tackling other more common diseases which are less spectacular, but ruin the everyday lives of people, such as diarrhoeal diseases in India? Maybe it would be better simply to try to improve sewerage systems or existing, but badly underfunded health services in poorer countries. In that way, there would be less spectacular wins, but they could more easily provide the conditions and care which people need in order to earn a living to support their families. Where a foundation is run by two individuals and funded by them and one other, it is though difficult to influence change.  It is not a democratic institution.

Probably the vast majority of the rich are not major philanthropists, but there are certainly many charitable foundations which have been created by the ultra-rich. Many have what most people would consider to be very worthy aims. Many industrialists, traders and bankers over the centuries have made some provision for the public through their wills, if not during their lifetimes. As we have seen with Mr Colston, we now have the difficulty of disentangling how the money was made from the benefit which the money now brings. Bill Gates was and is the man whom computer geeks love to hate, even though he was once of them.  Why?  Because he has built his ‘evil empire’ on software which was not very good, but which through very far-sighted marketing strategies obtained for him a quasi-monopoly in key sectors - and in the process killed many products which were in fact a lot better.  Geekworld by contrast always wants the very best software from a technical point of view and all at zero cost.  Perhaps neither attitude is ideal.

Some though, for instance the Koch Foundations, mix helping the poor and the disadvantaged of the world, with promoting other pet ideas. The Koch brothers have made significant contributions in the field of health, but have also used their charitable and so tax status to promote the idea that global warming is nonsense or is a naturally occurring phenomenon caused by sunspots. Many in the United States and in this country use their money in order to promote political ideas through the creation of Think Tanks. They make available their ideas through reports which are published and sent to ministers and to journalists. These organisations are supposed to have an educational and research purpose and so have a right to charitable status which provides the tax benefits which help to support them. Obviously the poorer in society are not in a position to have the influence on power given to the rich - simply by being rich. The nearest that they can get to it, I suppose, is through crowd funding – which has had some success, but is hardly a reply to a the power wielded by a multi-billionaire.

It is now reported that there is an anonymous Silicon Valley billionaire who sponsored a conference of scientists last September. It was convened to discuss the possible solution to global warming which I mentioned a few weeks ago – the use of igneous rock, ground to a powder and put into the ocean or on beaches in order to sequester Carbon Dioxide.  Now I happen to think that, based on the information currently available, it would be a very good idea in principle.  But it is likely that a super rich individual could himself provide the funds needed to at least start off the process and keep it going for a few years.  There are even ultra rich people who could just decide to continue it indefinitely. They could, if they wanted, operate outside the jurisdiction of any government. Obviously that would mean that the stultifying effect of red tape would simply not exist, but it would also mean that one person was seeking to change the earth’s climate without any democratic consent.

But, of course, that is in effect what all of the ultra-rich philanthropists are doing. Their generosity is a bar to any real interference with what they do for the benefit, as they see it, of mankind. So what happens when the original benefactors die? When Bill and Melinda are no longer there, who will take over? Their children? Will they be such good decision makers or make the sort of decisions which, even if not representing optimal use of the funds, at least have a beneficial effect? Our experience of the next generations of previous rich benefactors does not give us much hope. It’s what’s called regression to the mean. So what happens if not? With the financial structures we have in place which encourage the concentration of wealth in a few families hands, are we not in danger of being in a situation where, even if we have notional democratic control, the control we have is largely illusory? You may though reply that it has always been like this. Whether it was the aristocrats or the various religious institutions, the man on the Clapham omnibus has rarely had any significant control over how the country was governed. 

So then, as things stand, despite the obvious problems, I do not think that there will be any great attempt by government to fight against the philanthropists, those seen as trying to take some of the load off government’s backs. But this means that we now we have the biggest charity in the world, run by someone who is not known to be particularly religious. He does not have the hang-ups of many Catholic or Muslim religious charities, those which are also to be found in the aid criteria of the religiously-constrained American government. It will be something of an irony, therefore, if the former head of the evil empire known as Microsoft, together with the most successful investment capitalist of our era, become the real saviours of mankind.  What will the religious community do then? What will the left do or think when faced with tangible benefits of capitalism?  Will they say “Blessed are the rich”?

8 September 2020

Paul Buckingham

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