By Raj Kumar
If you saw the latest episode of the Netflix show Patriot Act with Hasan Minhaj, you heard Minhaj say we have to tax that ass . . . of the ultra-rich, that is. Minhaj asked if billionaires and big philanthropy can save us. He doesn’t think so, and nor does writer Anand Giridharadas. They believe billionaires’ wealth needs to be taxed. Devex founding president Raj Kumar doesn’t see it that way. In this passage from his book The Business of Changing the World: How Billionaires, Tech Disrupters, and Social Entrepreneurs Are Transforming the Global Aid Industry, Kumar argues that the debate on taxing the rich is shallow, that there are more factors to consider. Instead, we should have results-oriented metrics in place in addition to laws to keep Richie Rich donors accountable and transparent about their investments.
As much as billionaires might like to think of their giving as an unalloyed good, their philanthropy will increasingly be a subject of controversy and a political issue itself.
In the United States, where more than half of all billionaires live, even our president among them, there is growing concern that our political system is being undermined by the divide between the billionaire class and everyone else. That has, in turn, put major US philanthropy in the spotlight, as three recent books make clear.
In his book The Givers, David Callahan, a philanthropy critic, worries that massive private philanthropy is diminishing the role of government when it comes to public policy. Rich donors shaping society the way they like through tax-deductible political campaigning in the guise of charity and direct provision of social services runs counter to a democratic American society making its own choices. Similarly, Robert Reich, a Stanford University professor and author of Just Giving, sees the fast growth in private philanthropy as a subversion of government: the charitable-giving tax deduction reduced government revenue in the US by $50 billion in 2016. All that philanthropic giving could have been directed by government according to the democratic wishes of citizens. Finally, Anand Giridharadas’s book Winners Take All examines how billionaire giving is part of a pernicious elitism that stops questions about inequality in their tracks. Writing big checks to good causes can take attention away from problems elites themselves are causing, he worries.
As we face a coming wave of billionaire philanthropy, what’s required are rules for the road, an example of which would be an admonition against anonymous giving. This is a historic opportunity to fundamentally change the world for the better, but we can only seize that opportunity if billionaire philanthropy is held to high standards of transparency and effectiveness. Those standards might need to be enshrined in law if billionaire philanthropists don’t act quickly to demonstrate they are engaged in responsible giving.
Those seeking solutions to broader inequality are on the right track. Left unchecked, inequality can lead to “state capture”—a situation where a few wealthy people or interest groups effectively control the government. That can happen even in countries that hold elections and are technically democracies. As a result, there are tax, regulatory, and campaign finance reforms that may be required to mitigate the worst aspects of our current “gilded age.”
But even if, for example, funds could be raised from a billionaire tax, governments would certainly not deploy the money entirely to end extreme poverty or achieve other critical zero goals. Already we face the problem of governments in rich countries dedicating too little funding to foreign aid—in the United States, it makes up just 1 percent of the federal budget. Mark Zuckerberg and Priscilla Chan have pledged their massive future giving to education and human health. If more of their money were to be taxed by the US government, according to its current budget priorities most of it would be spent on defense, entitlement programs, and interest on the debt.
That’s why the debate about billionaires paying more taxes versus donating more to charity is important, but too shallow on its own. We can’t focus only on the amounts. Just as there is scrutiny of what governments spend tax revenues on, there needs to be scrutiny of what billionaires do with their philanthropic investments. What kind of impact are they actually having?
Zuckerberg and Chan’s initiative is a case in point. Organized as a limited liability corporation, CZI is able to operate with little transparency, even though it is growing to become one of the largest philanthropic organizations in the world and could one day even eclipse the Gates Foundation.
The operating model Zuckerberg and Chan have in mind is also unusual and potentially problematic: they don’t focus on giving grants to achieve their objectives—as nearly all other foundations would. Instead, they want to launch and operate programs themselves. This means that rather than maintain a small staff for grantmaking and advocacy, they will need to build a large in-house implementation team. Already CZI has a staff of 250, two and a half times the staff size at Bloomberg Philanthropies, even though the funding levels are nearly identical. That team includes 125 engineers, as CZI aims to build technology tools to advance scientific discovery in the medical field and improve learning outcomes in education.
As CZI scales to an organization that spends billions of dollars per year, its staff size could end up in the thousands. Funds that could have gone to social entrepreneurs and NGOs competing against each other to present the best ideas and results may instead end up building a massive institution that faces no competitive pressures and can’t easily be scrutinized by the public. The approach might be practical, given CZI’s central focus on technological innovation and the unique skill sets of its founders, but it could also be a mistake that distorts the aid market. Ultimately the public will need to be able to have an open and transparent debate about CZI’s approach, even though CZI is organized as a private corporation.
The debate over whether billionaires should spend more on philanthropy or taxes isn’t restricted to the rich countries where most of them live. A big part of the global development challenge is increasing the tax base in low-income countries, improving the capabilities of governments there, and pushing those governments to spend more of their limited resources on health, education, and infrastructure. Part of this agenda entails better tax enforcement, especially for the richest citizens of the poorest countries. But that’s hard to achieve, and alone won’t close the gap. And there are some foreign aid programs that have these goals, but private philanthropy has the most flexibility to attempt to influence and incentivize the governments of countries where most extreme poverty exists.
Mo Ibrahim’s foundation does something no government aid program could: the African billionaire offers a $5 million prize to any African president or prime minister who leaves office when his or her term ends. It’s an incentive to prioritize democracy and the rule of law, and just this year it was awarded to the outgoing president of Liberia, Ellen Johnson Sirleaf.
Like the Gates Foundation’s funding of FAO and WHO and Ibrahim’s prize, private philanthropy might just be able to make United Nations agencies, international organizations, and governments more effective in a way that just increasing taxes on billionaires can’t.
The idea that trillions of dollars in new funding could soon become available to end extreme poverty, eliminate disease, and improve our planet and our lives strikes me as a good problem to have. That some of the most talented new economy leaders like Bill Gates, Michael Bloomberg, and Mark Zuckerberg would use their credibility, political clout, and expertise to move the needle on polio, smoking eradication, and education is a good thing. We need to both push more billionaires into that column and hold accountable those who don’t act. We need to call out billionaires who give just to popular causes or pet projects and encourage those who instead fund proven, cost-effective interventions that maximize impact.
It won’t be enough to sit back and watch more billionaires slowly sign up to the Giving Pledge and make their mark against the issues they care about. We’ll need a highly engaged public encouraging results-oriented philanthropy and holding billionaires accountable when their giving isn’t generating or even targeting the results the world needs. And we may well need laws and rules around transparency that allow us to do that. In the quest to end poverty, nearly eight hundred million ultrapoor adults and children are urgently counting on our ensuring their lives are on top of the global agenda.
About the Author
Raj Kumar is the founding president and editor in chief of Devex, which the Washington Post compared to a “Bloomberg-style” media platform for the aid industry. A media leader for the World Economic Forum, Kumar is a noted commentator on global development. He lives in Washington, DC. Follow him on Twitter at @raj_devex and visit his website.