Who Moves The World?
An enquiry into the world of philanthropy
Medici and the Renaissance
When the world thinks of the Renaissance, it thinks of Da Vinci, Michelangelo, the Sistine Chapel, and the Mona Lisa. The entire period has come to symbolize innovation, happiness, beauty, and art, and it stands as a symbol of hope, that humanity holds within itself the capacity to create good things. But apart from a select few among us, few speak of Lorenzo de’ Medici, the head of the Medici Bank in Florence.
I like to remember him as the patron of several great scholars, philosophers and artists including Leonardo Da Vinci, Michelangelo, and Botticelli, and as the revolutionary who grew the Medici library by ambitiously trying to find ancient Greek texts which included finding and preserving the only surviving copy of Epicurus’s ‘On the nature of things’. With what would currently be equivalent of the modern day value of $500,000 million, Medici fueled the renaissance for 30 years. The secret to Medici’s success was not that he gave away a lot of his wealth to let artists and philosophers do what they wanted, what separated him and in turn the period he helped build was that, in addition to his generosity, he had a vision, a central vision for the arts, academia, and philosophy. He instructed his artists to use their art to promote certain philosophical ideas like love, beauty, wisdom, heroism, and truth. Medici, in every sense of the word was a philanthropist, someone who used his wealth to make the world a better place and vastly increased the quality of life of the people who were lucky enough to live in that era. (School of Life 2016)
Philanthropy has come to be defined as a private initiative for public good. It is an investment to fuel, catalyze, and ignite ideas for the betterment of the public with an emphasis on quality of life. Where charity will seek to relieve the pain of the suffering, philanthropy will seek to find a permanent cure.
Modern Philanthropy has been championed by the likes of Bill Gates, Mark Zuckerberg, and Michael Dell, each of whom set up organizations which are trying to solve crucial world problems through the wealth accumulated by their patrons. Billions of dollars have been spent trying to battle some of the toughest battles in healthcare, poverty, and education. Yet, skepticism around their motives and methods always seems to find itself lurking around the corner.
The Chan and Zuckerberg initiative (CZI) has been openly accused of funneling funds to avoid paying taxes, and the Bill and Melinda Gates foundation (BMGF) has been accused of being too big and having too much pull over government agencies.
What makes humans so skeptical of capitalists trying to invest in public welfare? Why does the prevalence of the profit motive completely negate all possibility of genuine philanthropy if there is such a thing?
The BMGF vs. the State
The Bill and Melinda Gates foundation has pledged to give away close to $44 billion to take on certain challenges in healthcare and global development, and has till date spent several billion dollars trying to increase access to vaccination, fund cures for infectious diseases, and invest in high- risk high- pay off ideas that the government is usually hesitant to get involved in. To the point where investments from the BMGF have actually revitalized investments in scientific research, a field that had seen no increase in public funding despite the doubling of the fiscal budget. (Belluz 2016)
It seems that organizations and governments in general seem to find it more fruitful to invest in ventures that the BMGF is involved in by putting faith in the executional and technological expertise that the organization brings with it. This falls flat against conventional wisdom which would have you believe that if a certain development goal receives huge private funding, governments would instead focus their efforts on other neglected areas.
Public agencies have also grown heavily reliant on BMGF for funding and guidance, to the point where Bill Gates now sets the standard for how research proposals are to be made for public grants. (Mathews & Ho 2008)
This has begun to worry critics all over the world including people of his own kind. German billionaire Peter Kramer has accused the BMGF of trying to replace the state, and claiming that philanthropy is a way for the rich to not pay taxes.
“It is all just a bad transfer of power from the state to the billionaires. So it’s not the state that determines what is good for the people, but rather the rich want to decide. That’s a development that I find really bad. What legitimacy do these people have to decide where massive sums of money will flow?” (Cahill 2015)
Let’s put some numbers into perspective — the total endowment of the BMGF as of 2015 was $44 Billion, the GDP of the United States of America in comparison was $17.9 Trillion. So we’re looking at 0.02% of what the USA is generating. The USA spends close to 17.2% of it on healthcare each year, that’s close to $3 Trillion (Almost 70 times of what BMGF plans to spend in its entire lifetime).
Let’s also look at the World Health Organization (WHO), which is an international public health body directed by the United Nations to help the world achieve the “highest possible level of health”. Over the years it has played a leading role in the eradication of several diseases including smallpox and is fighting a full blown war against Malaria today. It has 194 member states including the USA, UK, and Germany (Mr Kramer’s homeland), each of which has the right to enjoy the fruits of the progress made by the organization. In 2015, it had a measly budget of $4 Billion, only $936 million of which came from member states. The rest was voluntarily donated by private funders and foundations. A report by Global Health Policy quotes “Bill and Melinda Gates donated most of that — slightly more than $446m in fact. That’s 24 times more money than Brazil, Russia, India, China and South Africa combined” (Harmer 2012)
When private funders contribute to 3/4th of the budget of an international organization, does it really come as a surprise that they are ambitious about certain personal goals like eradicating Malaria? A philanthropist doesn’t just walk into the WHO with a bag of cash and says “go nuts”. That goes against the very definition of what a philanthropist does. Just like the artists of the renaissance, the organization is instructed to focus on certain goals. It is not hard to imagine why the rich have grown sceptical of the efficiency of the public systems plagued by corruption, ineffectiveness, and lack of innovation, and have in turn taken the responsibility of running pilot developmental projects themselves.
The tax relief argument
While larger philanthropists march on in their pursuit of changing the world, some of the smaller ones are being accused of exploiting the structures that the government has set up to incentivize donations. Questions about their motives and moral integrity are often put in the limelight, as the media blames them for pursuing their own personal gain through tax relief, instead of pursuing genuine altruism.
While this skepticism is well founded because of the large profit making and exploitative machinery that capitalists are usually associated with, the tax saving argument doesn’t quite make sense.
John Low, the CEO of the CA Foundation said it was wrong for the media and the government to equate tax relief on major donations with tax avoidance. “This is not a ploy to save tax. Philanthropists who make large donations give away far more than they could ever hope to claim in tax relief”.
Mathematically, Low’s argument makes perfect sense — “If the gifts are deductible, the actual cost of the donation is reduced by your tax savings. For example, if you are in the 33% tax bracket, the actual cost of a $100 donation is only $67 ($100 less the $33 tax savings). As your income tax bracket increases, the real cost of your charitable gift decreases, making contributions more attractive for those in higher brackets.” (Winnet, Kirkup, and Hope 2012)
What’s clearly evident here is that even if a person ends up saving $33 on a donation of $100, he/she still ends up giving $67 of it. There is no scale or combination of this where it would make economic sense to give money away for the sake of private gain.
Unless, there was a loophole which let the money find its way back to your account. Something that Mark Zuckerberg seems to have figured out.
The Chan and Zuckerberg Initiative
Critics have been far more seething in their critique of the world’s 5th richest person, blaming the Chan and Zuckerberg Initiative of being set up as an LLC instead of a non-profit specifically to save on tax revenue since an LLC allows for investments in private ventures as well (aka profits). They also question Zuckerberg’s decision to donate his shares in Facebook instead of actual money since donating of shares exempts the owner of paying taxes on the rise in their value, while the entity that receives the donated shares can actually sell them without paying a dime to the government. This coupled with Zuckerberg’s recent foray into global advocacy for telecom, and his position in the world as the CEO of the most powerful communication tool ever created does not argue well for his motives. How much more money does Mr. Zuckerberg want to make? Is $55 billion not enough?
These are valid questions that the media and the public are completely right in demanding answers to. His shady tactics have in fact cast a giant shadow over all his philanthropic initiatives and have compromised the livelihoods of millions of people.
His free basics (internet.org) proposal was shot down in many countries including India because of the control he exercised over the information that would be accessible and the direct profits he would make by virtue of the ad revenue that this new audience would generate. (Elgan 2016)
Schools funded by Zuckerberg in Uganda were recently shut down because of their non-compliance to state approved syllabus and because of a lack of safety standards practiced. These schools were for-profit. If he doesn’t find it wise to spend the profit generated from these schools (in a poor country like Uganda) in increasing safety standards, then there’s not much of a case that can be made for his motives. (Britton 2016)
Whether Zuckerberg is genuinely a profit mongering capitalist trying to con humanity into submission or just a misguided philanthropist with his heart in the right place is a question we don’t have the answer to.
What we can agree on though, is that the entire philanthropy eco-system seems to be in disarray as genuine philanthropists are beginning to face the consequences of misdoings of those who seek to exploit these structures for their own private gain.
How we can solve the philanthropy crisis
The problem clearly seems to be a lack of transparency and accountability in this whole system which is leading to this mistrust. This is what I propose — Governments need to get their act together and start funding public institutions like the WHO which have become too heavily reliant on philanthropists. Even though this shift from public funding to private funding has only led to good things, there is no match between the funds that 194 governments can put together and the funds that a few billionaires can. Kramer’s argument for misdiagnosing of public issues becomes very relevant here, as even though through private funding the WHO gets a direction to work toward, there is no way to determine if that direction is the correct one. We can’t go on curing fevers if someone is dying of cancer.
Since misdiagnosis is also a two way street, I suggest the setting up of two kinds of public agencies.
One will be a set of independent research labs funded by the public and the private sector combined (50%-50%) whose sole purpose will be the identification of world problems and rating them on the basis of dire need. For instance, prioritizing a cure for Diarrhea above another disease which is probably not as lethal.
The other will be a set of evaluation agencies whose sole purpose will be to check for two things –
A goodness rating to evaluate private companies on their environmental and social performance. This will be a combined rating which will help the public gauge how a philanthropist’s other companies have been performing and whether his/her act of philanthropy is actually a ruse to direct attention away from all the other things that they have been doing.
Another will be called an action rating which will gauge the impact that philanthropic organizations are actually having on the problems that they are trying to solve. This will further help the government design smarter policies which will incentivize organizations with a higher action rating, and will take away benefits of organizations with a lower action rating. This should, I think, plug the major loopholes that some rich people seem to be exploiting.
Many centuries ago, Medici’s vision and resources led to what was quite possibly the most prosperous and beautiful era in human history, and I believe that we can do it again. The time for another renaissance has come. If only we let the true Medici’s of our times do their thing.
History of Ideas — Renaissance. Dir. Mike Booth. Perf. Mike Booth. School of Life, 6 Nov. 2015. Web. 19 Nov. 2016.
Matthews, Kirstin RW, and Vivian Ho. “The Grand Impact of the Gates Foundation. Sixty Billion Dollars and One Famous Person Can Affect the Spending and Research Focus of Public Agencies.” EMBO Reports. Nature Publishing Group, May 2008. Web. 21 Nov. 2016
Belluz, Julia. “The Media Loves the Gates Foundation. These Experts Are More Sceptical.” Vox. N.p., 10 June 2015. Web. 21 Nov. 2016
Cahill, Tom. “Why Mark Zuckerberg’s ‘Charity’ Is a Scheme to Dodge Billions in Taxes.” U.S. Uncut. N.p., 02 Dec. 2015. Web. 21 Nov. 2016.
Harmer, Andrew. “Who’s Funding WHO?” Global Health Policy (n.d.): n. pag. Globalhealthpolicynet. 5 June 2012. Web. 21 Nov. 2016.
Winner, Robert, James Kirkup, and Christopher Hope. “Wealthiest People ‘abusing Tax System with Donations to Charities That Don’t Do Charitable Work’” The Telegraph. Telegraph Media Group, 10 Apr. 2012. Web. 21 Nov. 2016
Elgan, Mike. “The Surprising Truth about Facebook’s Internet.org.” PCWorld. Computerworld, 15 Feb. 2016. Web. 26 Nov. 2016.
Britton, Bianca. “Uganda to Shut down Zuckerberg-funded Schools.” CNN. Cable News Network, 25 Nov. 2016. Web. 26 Nov. 2016