December 19, 2006

The Role of Philanthropy.

What is the place for charity in our lives? How much money should we give for philanthropic purposes? Is it a virtue to even do so? These are some of the questions studied in this article in the Sunday New York Times magazine, What Should a Billionaire Give - and What Should You?, by the Princeton philosopher Peter Singer.

Considered the father of animal rights movement, Peter Singer employs very "amateurish" sort of philosophical arguments to conclude that philanthropy is a virtue and he enthusiastically enumerates the great things that are possible when people really get down to serious "giving". (I am using the word "amateurish" in a very precise sense to indicate their accessibility to an amateur, and imply no disrespect for the arguments.)

He first establishes that the rich should give. After considering the Hobbesian egoism and Kantian sense of duty as possible motivations for charity, he proposes several arguments.

Suppose you are rich. You see in front of you a poor and destitute person whose situation can be bettered with "minimal inconvenience or trouble" for you. Even if it is true that you had no hand in his destitution, Singer says that you "ought to" help him. "Anything else would be callous, indecent and, in a word, wrong" he says. Whatever the merits (or lack thereof) of this as a logical argument, there is very little one can fault.

Then he says it is in fact not true that rich countries had no role in the poverty of poor countries. Citing the philosopher Thomas Pogge, he says that "at least some of [American] affluence comes at the expense of the poor". For instance, when multinationals deal with governments of poor countries they pay little or no attention to the nature or legitimacy of those governments. This provides a great incentive for corrupt leaders of poor, but resource-rich countries, to grab power and trade away the natural resources, in stead of using them for their own people. This rush for personal enrichment also leads to "a cycle of coups, civil wars and corruption..." in those poor countries further contributing for the destitution of the people.

It is widely thought that when a man earns his wealth honestly no one has any moral right to advise him how to spend it. Singer argues that even this is not completely valid. It is easy to see that many factors play a part in wealth-creation. There are a number of skills that go into the make-up of any organization. These skills (for instance, technological or organizational) are created in a suitable societal structure for which some price should be paid. Merely paying a salary to the manager in an office is probably not enough to cover the costs for the entire system that played a part in creating that manager. Indeed, according to Nobel prize-winning economist Herbert Simon, "“social capital” is responsible for at least 90 percent of what people earn in wealthy societies like those of the United States or northwestern Europe."

Singer also emphasizes that private philanthropy is very important in addition to government aid. Private donors are not beholden to various pressures and interests. They can directly address the problem, instead of spending a lot of energy and time on packaging it in a palatable manner. Government aid comes with many strings attached and is often inefficient or even counter-productive. For instance, millions of condoms distributed in Africa to tackle AIDS are required to be made in America though it is much cheaper to manufacture them in some Asian countries. Political compulsions mean that less than a quarter of US aid goes to the world's poorest countries.

"The rich, then, should give" Singer concludes. The question then is how much should they give.

In 2000 at the United Nations Millennium Summit world leaders gathered and pledged to meet certain goals by 2015. They included among others, reducing the number of world's extremely poor and hungry by one half.
Last year a United Nations task force, led by the Columbia University economist Jeffrey Sachs, estimated the annual cost of meeting these goals to be $121 billion in 2006, rising to $189 billion by 2015. When we take account of existing official development aid promises, the additional amount needed each year to meet the goals is only $48 billion for 2006 and $74 billion for 2015.

Singer then goes on to calculate how much the richest Americans "could reasonably give".

The richest 0.01 percent of Americans (about 14,400 tax units) earn on average $12,775,000, with total earnings of $184 billion (minimum income being $5 million). These are pretax incomes. Now he supposes that these people could "reasonably" and "without much hardship" give away a third of their income. That is, about $4.3 million each and about $61 billion in total.

He continues down the income chain until he covers the top 10 percent American tax units. He reduces the reasonable give away for each lower group (for example the top 10 percent not covered in earlier groups gives away only 10 percent of their incomes).

Finally he comes up with the impressive figure of $404 billion (just from the top 10 percent of American families) well above the deficit in the budget for Millennium goals.

While the picture he paints is rosy, it is not very realistic for the simple reason that these families need to pay substantial amount of income tax in addition to the money he thinks is reasonable to give away. It may be realistic for somebody earning $12 million to give away $4 million, but if he is already paying $4 million tax, then it is surely not reasonable to expect him to pay another $4 million.

Nevertheless, the point in Singer's analysis is well taken. His contention that the Millennium Development goals are "indecently, shockingly modest" rings true. He is correct when he says, "[t]he target we should be setting for ourselves is not halving the proportion of people living in extreme poverty, and without enough to eat, but ensuring that no one, or virtually no one, needs to live in such degrading conditions."


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