Philanthropists are paying more attention to how they give their money away: The Economist, May 26th 2005
ANDREW CARNEGIE would surely have approved of David Sainsbury. The supermarket tycoon turned politician is one of Britain’s richest men. It was reported this week that he not only intends to give away at least £1 billion ($1.83 billion) during his lifetime, but to insist that his charitable foundation spend both its income and capital before he dies. Few rich donors have yet gone this far. But Lord Sainsbury’s decision is part of a broad trend among a new generation of philanthropists to play an active role in seeing that their money is well spent. Such efforts should be applauded.
In his great 1889 essay on wealth, Carnegie—a steel magnate who gave away about $7 billion in today’s money—argued that the rich had a duty to use most of their money to benefit the community, and should do so actively during their lifetimes. He took a dim view of those rich folk whose philanthropy consisted only of bequests in their wills—“men who leave vast sums in this way may fairly be thought men who would not have left it at all, had they been able to take it with them”—even arguing in favour of a tough inheritance tax because “by taxing estates heavily at death the state marks its condemnation of the selfish millionaire’s unworthy life”.
Carnegie’s belief in taxing estates remains as controversial as ever, though it may come as a surprise to learn that many rich people today feel the same way. Some 120 wealthy Americans, including Warren Buffett, George Soros and David Rockefeller among others, have opposed recent Republican efforts to scrap what Republicans like to call the “death tax”.
Whether or not scrapping inheritance taxes makes sense, thoughtful and well-targeted philanthropy is clearly to be encouraged. Inevitably, controlling how donations are used is especially difficult once the donor is dead. True, some charitable foundations have played a positive role as their founders intended. Britain’s Wellcome Trust is reckoned to do a good job in supporting medical research, just as its founder, Sir Henry Wellcome, who died in 1936, would have wished. But the effectiveness of many of the older charitable foundations is increasingly being questioned. Right-wing American critics love to point out—probably correctly—that Henry Ford would spin in his grave if he knew about the many leftish causes now funded by the Ford Foundation.
Trustees and charity professionals who run foundations after a founder’s death are rarely obliged to spend much of their capital (only 5% a year in America, for example), and may be tempted to put personal job security before the founder’s goals. There is no one (other than regulators, who may have their own agendas, and the press, who have theirs too) to hold them to account. And, says Carl Schramm, outspoken head of the Kauffman Foundation, many other foundations have “undertaken projects or programmes that were capricious, poorly thought out or just plain silly.”
So no wonder a growing number of wealthy donors are declining to leave the fate of their charity to chance. Indeed, many of today’s philanthropists—including Bill Gates, who has so far donated over $20 billion to his foundation—are, like Lord Sainsbury, intent on being far more active than previous generations of philanthropists in setting clear goals and devoting a lot of their own time and energy to seeing that their money is well spent, during their own lifetimes. This is certainly the best way to ensure that, as Carnegie put it, they do not “pass away ‘unwept, unhonoured and unsung’”.