Philanthropy vs. Democracy

23 July 2019

Philanthropy vs. Democracy: Article by Helmut K. Anheir, PhiLab member, published on Project Syndicate. Helmut K. Anheier is Professor of Sociology at the Hertie School of Governance in Berlin and at the Max Weber Institute, Heidelberg University.

Philanthropy vs. Democracy

Philanthropy vs. Democracy Helmut K. Anheier

Jul 12, 2019 | HELMUT K. ANHEIER

BERLIN – Donating private wealth to worthy causes is an ancient, noble institution. But, for as long as philanthropy has existed, it has also been a controversial practice. “To give away money is an easy matter, and in any man’s power,” according to Aristotle. “But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man’s power nor an easy matter.”

If anything, that controversy is even more salient in today’s world, because the role of philanthropy has become profoundly unclear. Governments too often regard philanthropic foundations as cash machines to fill gaps in public budgets or to help implement policy. Wealthy donors eager to mitigate questionable behavior or otherwise bolster their public standing are easy prey for politicians seeking quick fixes. And other beneficiaries of philanthropy are afraid to bite the hands that feed them.

The result is a lack of real debate about the sector’s potential and limitations, much less answers to fundamental questions related to equity and democracy. And yet it is becoming increasingly clear that this state of affairs is no longer sustainable. If philanthropy is to continue flourishing in the twenty-first century, two requirements must be met: the development of clear guiding principles that reflect the sector’s diversity, and better governance.

To Tax, or Not to Tax?

In purely financial terms, philanthropy in advanced economies plays a relatively minor role in serving the public good. The 87,000 foundations in the United States, for example,
have total assets of around $800 billion and make $55 billion worth of grants per year. These numbers seem impressive on their own, but they pale in comparison to the $4
trillion US federal budget. US philanthropic assets could cover federal government expenditures for only a few months, and then all that private wealth would be gone. The
picture is similar in other rich countries with large numbers of foundations, such as Germany, the United Kingdom, and Switzerland.

Nonetheless, some critics want philanthropic funds to be taxed in order to redistribute wealth and promote social justice. They frequently point to the double standards of predatory investors who have become do-gooders in order to whitewash tainted money. If Russian oligarchs, along with the Googles and Amazons of the world, do not pay their fair share of taxes, isn’t it morally objectionable if they then engage in tax-exempt philanthropy?

Moreover, many in the philanthropic sector are too self-righteous and set in their ways, as a visit to almost any of their many conferences will confirm. Philanthropists and their
beneficiaries prefer preaching to each other, and avoid questions from critical audiences. Some wealthy donors are even affronted by probing queries, and reply with an argument
that amounts to: “It’s my money, not yours or anyone else’s, and I can do with it as I please.”

Such thinking is profoundly misguided. Depending on national tax rates, philanthropic funds and the profits they generate include between one-third and one-half of foregone tax revenue. Some regard this tax exemption as a silent subsidy for the rich, who not only legally avoid paying taxes on the wealth they donate, but also decide how the money is used. Part of philanthropy is public, yet the public has little or no say over it. Accountability is a fundamental problem for the sector.

Read the full article here: Philanthropy vs. Democracy