If there is any core lesson from the Occupy Wall Street movement, it is that gross inequality cannot be ignored indefinitely. Nobel laureate economists such as Amartya Sen have warned us of this reality for decades. Yet there appears to be an inexorable tendency in America to believe that wealth is somehow deserved by those who have it. No wonder that America's income inequality is now approaching the same level as Mexico! The general response from the wealthy is that we are philanthropic and give lots of money to others. Yet, when the rubber meats the road, the philanthropy of the hyper-wealthy is often elusive and deceptive. Yes, they all give some money to philanthropies but as a share of their total income the number is generally quite small. A Center for Philanthropy panel study revealed that in fact the poorest cohort gives a greater percentage of their wealth to charity than the wealthiest cohort. Furthermore, a study by Google and the Center for Philanthropy at Indiana University notes that of the $250 billion in annual donations, less than $78 billion explicitly targeted poverty-related causes.
Even more disturbing is the culture of silence that has been created regarding the frugality and idiosyncrasy of the wealthy, because the poor supplicating minions who seek elite funds do not want to offend them and risk losing the crumbs thrown their way. Often for the hyper-wealthy giving up millions which may seem a huge sum to us is cognitively inconsequential to their lives. They certainly don't "hurt" by giving that away. I recall meeting CNN Founder and philanthropist Ted Turner at the World Conservation Congress in Barcelona 3 years ago and he admitted that setting up the United Nations Foundation with a gift of a $100 million was fairly painless for him since he had just gained that much in stock value without much effort the year before and had least expected it. Nevertheless, Turner deserves praise for creating a transparent and professional organization which evaluates philanthropic priorities based on an unusual public-private partnership arrangement.
There are other notable exceptions to the pervasive culture of painless and parsimonious giving. Bill and Melinda Gates as well as Warren Buffett have been particularly generous. To urge other hyperwealthy to give more of their wealth for philanthropy, Gates and Buffett initiated the "Giving Pledge" last year to get commitments from billionaires to donate at least 50% of their wealth to philanthropy. However, so far out of the 461 billionaires in America only 69 have signed up. Some argue that they would rather give their wealth anonymously. There may indeed be billionaires who are doing great works of philanthropy behind the scenes. For example, last year, I had an opportunity to have breakfast with Walmart heiress Christy Walton who has not signed on to the Giving Pledge but donates generously to many causes in Mexico where she owns property and much of her giving is done without much fanfare through organizations such as The International Community Foundation. However, the aggregate percentage number of wealth given by the wealthiest is publicly known and is still far too small as a percentage compared to where it ought to be give the level of global underdevelopment.
It is ironic that the term "development" which economists would use as a means of improving economic and social well-being has the connotation of cultivating donors in the halls of organizational power. As a university professor I am occasionally asked to meet with wealthy donors and "court" their interest in donations. Indeed, American academia would collapse without their gifts. But such "development" visits and schmooze-fests are like a dark art form necessitated by structural inequality. This often leads to awkward situations for universities as well. For example, the Koch Brothers, who are being criticized in liberal circles for their support of the Tea Party and circumventing democratic procedures, are among the most significant benefactors of MIT. This year MIT inaugurated the Koch Institute for Integrative Cancer Research funded by a multimillion dollar gift from their foundation -- a very worthy cause for sure. Equally awkward is the power wielded by George Soros on the liberal side of the political spectrum. However, his support of academic research organizations and nonprofits such as the Open Society Institute has played a vital role in helping with post-communist transitions.
There is a strange sense of entitlement that many donors have regarding their fortunes even if they have inherited rather than earned their wealth. I encountered this in a recent Twitter exchange with Donald Trump Jr., son of the eponymous real estate magnate. I respectfully suggested to him that his family should consider giving more in philanthropy in poor countries and he responded with impatience that I should do my "homework" and learn that he is on the board of a charity called "Operation Smile" which does surgeries on children with cleft lips and palates at birth. A worthy cause, no doubt, but this reminded me of yet another problem with the philanthropy game. The governance of nonprofits is now increasingly controlled by wealthy donors, who are given the ego boost of serving on boards to solicit their donations when they may have little or no substantive knowledge about the mandate of the philanthropy itself. Indeed, I must admit that there is pressure within university establishments to do the same -- much as we often try to find a match between substance and solvency.
Some of the best practices in philanthropy involve greater devolution of decision-making through foundations rather than individual gifts. Government incentives to reduce large trust funds for progeny and an encouragement of prioritized tax incentives for charitable gifts that meet urgent human needs such as health, education and targeted poverty alleviation. Social innovations to achieve such means should still be encouraged but there needs to be less idiosyncratic discretion in philanthropic decisions.
The bottom line is we need the rich -- desperately -- to be philanthropic. We do respect their generosity but they must approach their good fortunes with humility. It is sheer folly to think that wealth is all deserved. While the level of inherited wealth as the primary source of fortune among billionaires has declined in recent years, stable and reasonably affluent households have a definite competitive edge for wealth generation. Even the entrepreneurs who make their wealth through innovation acknowledge some level of financial stability is likely to have played a role in their success (for example Bill Gates' father was a successful Seattle lawyer and Mark Zuckerberg had an elite education because his father was a dentist). Narratives of rags to riches such as those of Oprah Winfrey or Herman Cain are worthy but marginal exceptions. The element of luck and a non-meritocratic confluence of circumstances usually plays an essential role in meteoric success. Hence those who are so blessed have an undeniable obligation to those for whom fortune might not be so aligned.