Scott Summer has written a thoughtful post on “The New Philanthropy”, suggesting that “nerdy” (rational) new billionaires, who made their way in the tech sector, may foster a new approach to non-profit ventures too. While “traditional rich businessperson” might do relational philanthropy, donating to their local hospital, to their university, perhaps—we might hope—to some think tanks too, these magnates may be instinctively driven to scalable big projects, through which they can maximize their impact in solving a problem.
This vision evokes a recent move by Jeff Bezos, who is launching a $2bn fund to help homeless families and build a network of “Montessori-like” preschools. It looks to me like Bezos asked what are the problems the current welfare system is less capable of dealing with. Homeless people (who escape the welfare bureaucracy) and education (that is strangled by bureaucracies) in a “difficult” environment are two of these areas.
Philanthropy is per se praiseworthy but, as we know well, is hardly enough to please critics of the market system. A CNN journalist, Lydia DePillis, has twitted the following comment on Bezos’s effort:
So Jeff Bezos is putting $2 billion into homelessness and preschool. Laudable. But you have to ask — is this better than just taxing the wealth of the richest man in the world, and making that money democratically accountable?
Benn Steil has commented, with a healthy dose of irony:
I learned a new term for taxing away the accumulated wealth of the world’s most successful entrepreneurs in order to stop them from giving it to philanthropic causes of their choosing: “democratic accountability”
This is a perfect reply. I think Ms DePillis’s comment is interesting for what she seems to assume. Let’s imagine that Mr Bezos was donating with his charities exactly the same amount of money he will be deprived of by the undoubtedly more heavily progressive tax system Ms DePillis evidently supports. So exactly the same resources are somewhat “socialized”, meaning that they are used for purposes devoid of any profit motive. The difference between such a scenario and one in which that money is actually taxed is that Mr Bezos somehow decides who the stewards of his money will be. If such money is taxed away, obviously, instead these stewards will be democratically elected politicians (hence the democratic accountability DePillis alludes to) or more precisely, bureaucrats of their choosing.
It seems to me that one of the true, meaningful, and perhaps unbridgeable political differences between people is actually this one. For many of us it is relatively safe to assume that, while it is certainly possible that Mr Bezos may pick the wrong people or be seduced by charlatans, he will have a substantial incentive to correct himself over time and try to appoint as stewards of his charity the most effective people in the job. Bezos will choose a problem and assemble the best team to deal with it, thereby profiting society at large – in respect to that particular goal, of course.
On the contrary, people like Ms DePillis are more likely to be suspicious of Mr Bezos’s intentions: they assume that—as he is a shrewd businessman—he only does charity in his own self-interest, which is in its turn incompatible with the greater good of society. So, he may appoint the best people – but they will be the best for his own goals and objects, not necessarily for the best use of that money for society at large. Such good use can be determined only by a collective and selfless body, i.e., the state.
Looking at things this way is actually revealing. For example, it reveals that, while people tend to assume that more libertarian-minded people tend to think of human beings as self-interested actors, their opponents tend indeed to regard capitalists as “self interest machines”, that can’t have socially praiseworthy goals. The original sin of profit making taints their persona no matter what they do: it makes them irredeemable.
Libertarian minded people need not assume that bureaucrats are evil: they may be perfectly good people who nonetheless face a structure of incentives that doesn’t reward responsibility nor efficiency. On the other hand, “hardcore redistributionists” need to assume businessmen are somewhat evil, so that they can ignore such difference in the structure of incentives between the private sector, generally speaking, and the public sector, generally speaking. I say generally speaking because you certainly have exceptions: badly managed and wasteful private companies and beautifully managed bureaucracies. Still, comparing the first with badly managed bureaucracies is a bit bizarre, as is in one case the cost of bad management is borne by everybody, while in the other only by the shareholders.
So, do you think that the same amount of money, for a noble social goal, will be better managed by a private charity or by government? This is a good political question. Assuming, of course, that your interlocutor is in fact interested in making sure that money is having a good social impact—not just in “taxing away” it for the sake of so doing.