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Against corporate philanthropy

The internet has come on a long way since I started using it as a teenager. Back then, before governments and large businesses understood the benefits of using such a cheap and flexible means of communication – it was a more playful, free and anarchic space. Most people’s first email addresses are amusing little snapshots of attempts at self expression as of the late 90’s or early 2000’s. I think of mine as a charming relic of a more innocent time. Which is why this advert upsets me so much.  For me, it represents the forcing of corporate attitudes into a space that used to be expressive and vibrant.  This, to be clear, is not even the start of my argument against corporate philanthropy. It’s me laying my cards on the table emotionally. Corporate control of our cultural and intellectual landscape is troubling to me.

As Adam Smith memorably wrote and @CJFDillow likes, quite rightly,  to quote “We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous.” A friend whose grandparents emigrated from the caribbean once told me about an incident that happened to her grandfather a couple of weeks after he arrived in the UK. A homeless white man asked him for change, and because he assumed that the man must really be in need, he handed over all the money he had. We have a natural tendency to respect and give weight to the demands of what we perceieve as “legitimate authority”. In Jonathan Haidt’s excellent book on “The Righteous Mind” he discusses at length the seemingly innate disposition we have to trust and respect legitimate authority –  and distrust and dislike illegitimate authority. I don’t want to go into his evo-psych justifications for this, because I think it’s important to consider ones everyday experience. As master Yoda might say, search your feelings, you know it to be true!

Ought we to trust profitable companies or wealthy individuals as legitimate authority? I think not. If a company is making large profits because they’ve found a special way to do something that others find valuable, it’s reasonable for them to have that innovation rewarded. But in reality, it’s not innovative companies that neccesarily earn durable profits. Rather its companies that have effectively created ways of generating stable and enduring  rents – or as Warren Buffet, who’s apparently quite good at understanding how to command wealth, would have it:

“Our approach is very much profiting from lack of change rather than from change. With Wrigley chewing gum, it’s lack of change that appeals to me. I don’t think it is going to be hurt by the Internet. That’s the kind of business I like.”

So if he’s right, and the performance of Berskshire Hathaways stock would indicate he has been, the way to command and increase ones wealth, at least historically has been to just find sources of economic rent and try and keep hold of them. If one looks at a list of the worlds billionaires, its remarkable how many of them are heirs and heiresses. I recall an  article celebrating the fact that two thirds of America’s 400 richest people had NOT inherited their wealth.   That of course means that 1/3 did. As a side note, I don’t see much distinction between very wealthy indiiduals and very wealthy companies. Both are just entities capable of directing large amounts of resources and human activity as they see fit.

So the first troubling aspect of corporate philanthropy for me is that it provides legitimation for a system of laws and property rights that we have that greatly reward economic rent seeking. Preserving wealth is far too easy – and political support for making it harder is non existent. Corporate philanthropy further undermines the case against making it harder to get rich by legitimating wealth and allowing the wealthy to say, truthfully, that were it not for them, such and such museum would not be funded or these orphans wouldn’t be fed and clothed – or whatever schemes they’ve chosen to spend a portion of their profits or rents on.The argument here is very similar to the one for fossil fuel divestment by pension funds. Buying stock in BP is not in and of itself going to harm the environment – but by making the income of pensioners contingent on the profitabilty of an oil company –  political support is likely to be lower for changing the rules to make oil production and consumption less profitable or attractive.

Then there are the incentives at play. For every dollar spent, corporate and individual philanthropists may well be trying to do real good – and may even be totally convinced of thier own sincerity – but they have a powerful incentive to use each dollar to maximise their own reputation and goodwill, as ultimately this is what will allow them to perpetuate their wealth. And as they are already wealthy or profitable, we can fairly surmise this is something they are interested in doing! If we are to have the choice between the wealthy and powerful deciding which causes ought to receive their largesse, or some more democratic or needs means of allocating resources, it seems very obvious to me that the latter is better. On one level, it’s fair to argue this is irrelevant- because for a given configuration of the world, we’ll have a certain amount spent by wealthy individuals on corporates on philanthropic things and a certain amount doled out by more democratic means. But this I think is to consider only partial not general equilibrim effects. Clearly, charities ability to replace corporate funding with funding from other sources is not going to be 100% – but equally clearly it’s not going to be zero. I’m confident enough in asserting that some kind of says law for charitable work operates – whereby supply creates its own demand! Charities are good at lobbying and fundraising.

So how far would I take this argument, in terms of what actual policy prescriptions I would make. Not far. In my ideal world, corporate philanthropy would be of no consequence whatsoever because wealth would not be so concentrated and corporate profits would be low. Wealthy individuals and profitable companies would have no case to answer that would make them feel the need to redistribute to causes that they chose –  and in the corporate case, they’d be mainly owned by either their own employees or shareholders who wouldn’t tolerate such largesse. In the meantime, I’d be very satisfied if people would join me in my belief that big companies and very rich people window dressing their rent seeking with virtue signalling philanthropy is not a good thing.

 

 

 

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