Philanthropists, Time to Promote Economic Change

Philanthropists may argue that while it's true economic and political structures create poverty and inequality, it's the politicians’ job to fix that. Is it?

Dwight D. Eisenhower worked on his farewell address for more than two years. The 34th president of the United States went through 20 drafts before finally delivering the result, on January 17, 1961.

His effort was evidently worth it: Fifty-two years later, the world has changed but his courageous analysis of the military’s true power over the economy, politics and society is as relevant, and worrying, as ever.

Much of the speech was devoted to the danger - to America itself - inherent in the sheer size and power of the U.S. military. It was Eisenhower’s use in this address of the term “military-industrial complex” to describe this behemoth, with 3.5 million workers, that brought it into popular use.

Ike evidently didn’t have much faith in politicians withstanding the powerful, dangerous military interest group. Only a keen civilian society could stop those interests from taking over American politics and foreign affairs, he believed.

Eisenhower’s words come to mind every time military budgets and war are discussed anywhere in the world. Yet the military lobby rolls over the rest of the people, dragging the world into war again and again, squandering hundreds of billions of dollars. Or, as the commander of the biggest war of all put it:

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”

A giant industry of war and peace

I suspect that Israel’s defense establishment is yet another tremendous interest group, which has managed to link itself to similar interest groups around the world and has sustained a giant industry of war and peace from which a lot of people make their living.

I’m not the only one with Ike on my mind. In July the concept of the “military industrial complex” reached the opinion page of The New York Times. It had nothing to do with American plans to attack Syria. The origin of this barrage was the industry farthest from war; and the author was Peter Buffett, none other than the son of, who criticized and embarrassed the most elegant clique in the world, to which his father Warren Buffett also belongs – philanthropists.

Peter Buffett, a musician who received more than a billion dollars from his father for a fund called the NoVo Foundation, titled his op-ed “The Charitable-Industrial Complex.” In it he savages the philanthropic world, exposing himself to quite a risk. He is the scion of a hugely successful businessman, they could say, so who is he to cast stones at successful businessmen who give back millions and sometimes billions from their personal fortunes to society, helping some of the neediest people on the planet?

While most of Peter Buffett’s op-ed is devoted to attacking the philanthropic sector, the most important part is his main point: Philanthropy should be used to tear down the economic models that create some of the problems the charities are trying to solve. “Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left," he wrote.

The lives of many are being destroyed by a system that enriches the few, writes Buffett, and the worse it gets, “the more heroic it sounds to ‘give back’” – a process he calls “conscience laundering.” But all that accomplishes is to perpetuate inequality, he writes: The rich sleep better at night and the poor get just enough to keep the pot from boiling over.

Google “Charitable-Industrial Complex” and you’ll find Buffett’s original article as well as hundreds of rebuttals. Most, naturally, attack him. People who donate enormous amounts to and who work for the institutions that are changing lives of the poor, the sick and members of disadvantaged minority groups are furious at being belittled. But Buffett actually takes it a step further. He argues that the philanthropic sector is in some cases responsible for preserving the structures that create poverty and inequality.

No glory

Some philanthropic effort is indeed conscience laundering by people and companies that exploit the public with the one hand while reaching out with the other, and this may well perpetuate the status quo in many areas. Much philanthropic spending is indeed pouring money into a bottomless pit.

Philanthropists may argue that while it’s true that economic and political structures create much poverty, want and inequality, it’s the politicians’ job to fix that.

This argument, unlike the first one, is weak. The biggest philanthropists know politics and know its constraints. They know that politicians are typically engaged in survival, in keeping interest groups happy, in staying popular, in doing simple things that people can grasp easily. They know politicians are very unlikely to bring change.

So why don’t philanthropists pick up Buffett’s gauntlet and promote structural economic changes?

Three reasons come to mind. The first is that philanthropists want triumph. They want to see results and sometimes, to get credit. Not necessarily in the press – many work anonymously. But they do want credit within their group – inside the philanthropy club. Trying to foment genuine change would inevitably lead to confrontation, direct or indirect, with the existing elites and interest groups.

Second, any philanthropist trying to introduce structural changes, whether economic or political, doesn’t risk only a battle royal (including with the unwitting pawns of the interest groups who don’t realize they’re only hurting themselves); they also risk being unable to prove their success, at least in the short and medium run. As for the long run, who really thinks about that?

Philanthropists want love, recognition and results; even if they know they’re not really changing anything, they get enough positive reinforcement to deter them from picking up Buffett’s gauntlet.

That brings us to the third reason, the third hurdle. It’s the toughest one. What is the alternative? What are the solutions? Which structural changes?

Buffett says we need more imagination. That’s one of the more interesting points in his article, and also one of its weakest ones. What are you suggesting? What models are you proposing?

Time to right new code

Some right-wing philanthropists argue that he is clearly communist or at least anticapitalist, although he explains that he is calling not for an end to capitalism, but for humanism. “Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market,” he writes, adding that it’s time for a new operating system – not 2.0 or 3.0 but something completely new – “built from the ground up. New code.”

Let me defend the younger Buffett. At this point in time we don’t have to present just alternatives and plans for change. In my opinion there are industries, places and areas where there are philanthropic endeavors that can create new code, new politics, other incentives. There is great value in the very existence of knowledge and ventures that indicate failures in the system and present ideas that no person or body currently has any economic incentive to promote.

But in most cases the work that needs to be done is more basic: There needs to be recognition that time, energy and money need to be spent on searching for new solutions, new structures, new concepts and beliefs. We need to recognize that philanthropy needs to lead this process because if it doesn’t, then any new structures will be shaped by the same old system. The powerful will win again, reorganizing the market and budgets for their own greater good, and nobody will be there to represent the silent majority and the public interest.

The working assumption is that most philanthropists are pure of heart. They want to do the right thing and feel good about themselves. We must not throw out the baby with the bathwater and weaken them: We need to encourage them to go in new directions, to the next generation of social good – structural changes.

How does one induce philanthropists and other social leaders to move out of their comfort zone to a new, uncomfortable zone? Buffett didn’t say, but at least he started the debate. If you have ideas, do send them to guy.rolnik@themarker.com.

Bloomberg