Ideas@TheCentre
Time to celebrate the wealth creation that makes giving possible
'Tis the season of giving, and giving is nowhere more fashionable than among the world's billionaires. Around 60 of them have signed up to Bill Gates and Warren Buffett's Giving Pledge, which asks that billionaires commit to giving away the majority of their wealth. The pledges received to date are a Who’s Who of the Forbes Rich List.
Those who have signed up to the pledge have won plaudits, but it is remarkable that we do not similarly celebrate the wealth creation that makes such generosity possible. Until he took up charitable causes and committed to giving away his fortune, Bill Gates was hardly an object of affection in the public imagination. Whatever the software purists might think, Gates' entrepreneurial activities have conferred enormous benefits on billions of people. Gates has done more for humanity as a capitalist than he will ever do as a philanthropist. Yet these entrepreneurial achievements earned him little public respect, and he was prosecuted by the US Justice Department and EU regulators for supposedly harming consumers.
This lack of public affection for the creators of wealth may explain why many billionaires are so ready to commit to such extravagant and heavily publicised philanthropy. As objects of public suspicion, if not scorn, it is not surprising that some billionaires seek to buy their way back into the public's heart. Cynics argue that Gates is aiming to buy himself a Nobel Peace Prize. The cynics have a point. Truly selfless giving is done quietly, if not anonymously, and not on Oprah.
The term philanthrocapitalism has been coined to describe the philanthropic entrepreneurship of the likes of Gates and Buffett. But thoughtless philanthropy – what Peter Foster calls philanthrostatism – can do more harm than good. As the economist Bill Easterly noted in his article 'Why Bill Gates Hates My Book,' the software billionaire remains wedded to a flawed understanding of the ultimate causes of wealth and poverty. Matt Ridley, author of The Rational Optimist, recently had an exchange with Gates in the Wall Street Journal, in which Ridley patiently explained capitalism to the world's most successful capitalist.
The Giving Pledge billionaires would better serve humanity by highlighting the connection between their wealth creating and philanthropic activities and not falling victim to mistaken ideas about the ultimate causes of wealth and poverty.
Dr Stephen Kirchner is a research fellow at the Centre for Independent Studies and a senior lecturer in economics at the University of Technology Sydney.
