St Paul's Institute

Double-edged Philanthropy

by Barbara Ridpath

Posted: 30 Jan 2018

(This article is the second in our series on the subject -see also Maddy Fry's article 'City Giving: How to Think about it' of 24 October 2017. This article is based in part on research for the author's participation in the BBC World Service In the Balance programme Giving It Away broadcast on 30 December 2017.)

'No amount of charity in spending such fortunes can compensate in any way for the misconduct in acquiring them.' This quotation is from Theodore Roosevelt when, about 100 years ago, the first major philanthropic charities were being created in the United States with a portion of the proceeds of major industrial fortunes such as the Rockefellers, the Fords and the Carnegies.

Today there is much in the news about the Gates Foundation, the Chan Zuckerburg Initiative and the Giving Pledge, begun in 2010 by Warren Buffett and Bill and Melinda Gates to convince other billionaires to give away a majority of their wealth to philanthropic causes. The question is whether philanthropy is a better model for wealth redistribution than tax policy.

No one doubts that it feels good to help others. Many religions have an imperative to help those less well-off than ourselves, whether through Zakat or tithing, or other kinds of giving. This is an unequivocally good thing.

However, tax changes since the 1980s have made it much easier on both sides of the Atlantic to accumulate significant fortunes, at the individual, the shareholder and the corporate level. Those with the most money are most incentivized and most able to take advantage of tax minimisation techniques, and some resort to outright tax avoidance. Tax changes, together with declines in real wages for most of the rest of the population since the financial crisis have led to a gap between the 1%, the 0.1% and the rest of us that is worse than it has been since the 1920s.

This means that the wealthy can choose to redistribute their wealth, but have no obligation to do so. And they can choose to do it in any way they see fit. The wealthy have the liberty to determine what social ills need their attention and money, particularly in an era of public spending restrictions. This replacement of private money for public services, in food banks, education and health care has occurred by stealth. While the public does have a voice through the ballot box on the level of public spending, it has little or no voice on the use of private money.

The desire to be on the receiving end of some of this munificence keeps many from speaking out. In addition, it may well be argued that the wealthy are prepared to take risks with their money that the public sector cannot; they can experiment with new techniques or treatments. Some believe the use of techniques such as private equity that made them wealthy will provide a scrutiny over philanthropy that will yield faster and more efficient results than traditional charities. Experimentation with new approaches and techniques should be welcome.

Nonetheless, the subject is fraught with difficulties. For philanthropy that seeks tax benefit, recipients in the UK need to pass through the hurdle of the Charities Commission definition of charitable purpose and public benefit. Without a charitable deduction, anything that is not illegal can be funded.

While there are no easy answers to the rights and wrongs of such giving, here a couple of questions that might help you make up your own mind:

· Are charities funding actions and activities that should be done by government?

· Has the beneficiary been consulted on what is being done for or to them? The Church of Scotland often talks about 'nothing about us, without us, is for us.' Engaging the beneficiaries in the thinking is crucial.

· Does the donor drive the policy of the institution they're funding? Are there any dangers in this?

· Is philanthropy more or less likely to improve society's ills than government?

· What is the most effective way to achieve income and wealth redistribution? What is the most democratic way to do so?

In Luke 12:48, we are told that 'from everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.' Luke does not tell us how to make that happen.

About this author

Barbara Ridpath is the former director of St Paul's Institute.

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The opinions expressed in this article are those of the author, and do not necessarily represent the views of St Paul's Institute or St Paul's Cathedral.