Heavenly Gates (2012)

The Pathfinders Column from the September 2012 issue of the Socialist Standard

It must be a great feeling for anyone with a social conscience to be so ridiculously rich that they can spend their entire time doing something to alleviate a major global problem and actually feel that they are achieving something lasting and significant. Talk about the buzz, it must be a high that those seedy Russian oligarchs can never experience no matter how many yachtfuls of champagne they swim in or campaigning journalists they have knocked off by their hit-men. Cash-with-conscience philanthropists with billion dollar bank accounts must feel like the messiahs of the hi-tech age, second only to the great saints but without the unpleasantness of a stake-burning  or a crucifixion to earn their place in the pantheon of the Blessed.

Bill Gates, through his charitable Foundation, is one such saint, who has poured billions into agricultural R & D, malaria, polio and a host of other third world problems and who is a leading light in the Giving Pledge, a club of super-philanthropists dedicated to giving up the lion’s share of their wealth to solve problems of poverty, starvation and preventable disease among the world’s poorest ‘bottom billion’. Just last month the Bill & Melinda Gates Foundation hosted a Reinvent the Toilet fair at their Seattle campus, a successful competition to find a design of lavatory that operates without running water, electricity or a septic system, at a running cost of no more than 3p a day and which captures or recycles energy. The applications of such a non-water-based design in many of the world’s poorest and resource-starved countries are too obvious to need spelling out. Poor sanitation kills 1.5 million children a year, and causes 50 percent of hospital admissions across the developing world. Bill Gates has the Midas touch. Every social ill he turns his attention to instantly sprouts solutions. He can even turn poo into gold.

How could even the most jaded and cynical socialist find anything to criticise in the activities of such a man? Churlish in the extreme to whinge about the often ruthless methods by which St Bill got to be so rich in the first place. Here’s a man who cares, really cares about the world’s poor, and is so stupifyingly rich that he has no need to impress anyone by pretending fake concern. Ditto Warren Buffett, possibly the most class-conscious benefactor in the super-philanthropist club and famous for complaining that he pays less tax than his secretary. Ditto Mark Zuckerberg, the billionaire owner of Facebook who is barely out of his teens but whose ability to wield an economic power fifty countries would go to war to possess is mitigated, mercifully, by an apparently decent character and youthful save-the-world idealism. Arguably the force behind the super-philanthropy of the Giving Pledge is the ghost of Andrew Carnegie, in whose essay The Gospel of Wealth are to be found the arguments most influential in the thinking of these plutocrats. Carnegie’s view was that of the enlightened plutocrat, the sort who knows he can’t take it with him, the sort who has ceased to yearn for loot and now yearns for legacy. Carnegie, it must be said, meant well, and indeed even implied at one point that a future society might be built along egalitarian lines which would render his conception of top-down charity redundant. Given such a mentor, how could anyone gainsay the efforts of the 81 members of the billionaire club of the Giving Pledge, apart from perhaps suggesting mildly that all their money combined still won’t go as far as they hope or achieve as much as they think?

To return to the poo competition, a team from the London School of Hygiene and Tropical Medicine submitted an entry which uses a black soldier fly larva to eat the organic waste and turn it into environmentally-friendly animal feed. This toilet is now being field tested. The winning design from Caltech is solar powered and generates hydrogen fuel and electricity. These and other designs are fantastically useful and there is no question that with implementation they will improve the lives of millions across the world. Bill and Melinda score another home run.

But there is a sense in which Bill’s public-spirited generosity has an insidious dimension. It’s the sense in which he functions as capitalism’s PR agent, always accentuating the positives, the successes, the achievements, the progress. Is it an achievement, for instance, to get 81 of the world’s billionaires to join the Giving Pledge? Undoubtedly, and the best of luck to them. But what are we to make of the other 1145 billionaires (at 2012 estimates) who have not signed up? Some are perhaps hesitating. Many will have simply turned their noses up at the chance to give a little back. Socialists are always pointing out that the enemy of humanity is a system, a set of abstract social agreements, not any real living individual. However that doesn’t alter the fact that many of the super-rich are evil, squalid little shits who, if there turned out to be a Hell, fully deserve to rot in it. Bill can’t very well admit this in public since he acts as unofficial ambassador for these manicured Mafiosi. He’s like Cliff Richard trying to front a death metal band. You only have to browse through the Forbes list (www.forbes.com/billionaires) and compare it to the Giving Pledge list (LINK) to see how the vast majority of these paper princelings tend to regard the pressing issues of world poverty and hunger – they couldn’t give a flying shite into a Bill Gates organic supertoilet.

But Bill’s PR work doesn’t simply consist of putting a nice face on a lot of nasty bastards. He also has ringing praise for the social system which put him where he is today: ‘Capitalism is a phenomenal system because it’s generated so much innovation.  Other systems don’t allow that to happen. There is no other system that’s improved humanity, whether on a hundred year scale or a ten year scale. The world is better off…’ (http://www.bbc.co.uk/news/business-16738888).  Compared to what, feudalism? That’s like saying that the NHS is better than witch-burning.  Compared to Soviet ‘communism’? That was nothing but state-run capitalism in disguise, like British Rail on a bad day but with show trials. What are these ‘other systems’ against which capitalism has performed so miraculously? Bill doesn’t say and of course Bill doesn’t know. It’s just a rhetorical device. The only reason capitalism looks like a winner is because capitalism is the only horse running, a sure-fire bet that Bill and his friends won their money on. The real talent, the one that will make capitalism as obsolete as the Hansom cab, the future system Carnegie suspected might be possible, remains locked in the stables while Bill’s earnest propaganda helps to keep it there.

What, to a socialist, is the real indictment of capitalism behind the Poo Competition in Seattle is the fact that any of these university teams could have come up with any of these designs without the Gates Dollar to spur them to heights of inventiveness, but they didn’t. Why didn’t they? Because scientists don’t care? No. Because science has to do what money says and, except for the rare occasion when someone like Gates comes along with a wad of it, money doesn’t care.  Bill Gates thinks that money solves problems, but these are problems all created by money in the first place. Capitalism creates an apocalypse and then picks its way across the corpses rescuing the odd orphan, trumpeting its own philanthropy as it goes. Bill Gates surely knows this. They all do.  Though it isn’t nice to speak ill of the dead well off, in this sense, Bill and his friends are as full of shit as his toilets.

Paddy Shannon

Philanthrocapitalism IV: The Messianic Rich (2018)

From the August 2018 issue of the Socialist Standard

Part Three

The concluding article of our series on ‘philanthrocapitalism’

No such thing as a free gift

A significant motive driving philanthrocapitalism has to do with the tax incentives involved in charitable contributions. In most countries in the world, taxes constitute the primary source of government revenue (government borrowing, mainly through the bond market, is another important source). Paying less tax may be good for the businesses concerned but it obviously impacts on government revenue and, hence, the state’s capacity to finance reforms such as social welfare programmes. That in turn has consequences for private charity and the scale of the task it faces.

Some philanthrocapitalists appear to have grasped this point well enough. An example of this is the Boston-based project, Responsible Wealth – a ‘network of business leaders, investors, and inheritors in the richest 5%’ of the US population. It lists amongst its supporters Warren Buffet and Bill Gates Snr and is an offshoot of the aforementioned ‘United for a Fair Economy’ which it describes as ‘an organization that supports workers to organize and advocate for policies that make our economy more fair and equitable’ (www.responsiblewealth.org).

Amongst other things, it calls for higher taxes on the very rich and an increased level of public investment. However, the bizarre spectacle of billionaires taking up apparently left-wing causes might not be all that it seems. There is undoubtedly an element of self-interest involved, based on a recognition that the way things are panning out might not be good for the long-term stability and prosperity of capitalism itself. Though a system of cut-throat competition tends to foster ‘short-termism’, that does not rule out the possibility of sections of the capitalist ruling class rising above their circumstances to take a longer-term perspective.

Given that the state, famously described by Marx as the ‘executive committee of the ruling class’ has more leeway than capitalist corporations in what it is able to do within the context of market constraints, it is not surprising that such a longer-term perspective has tended to be associated with, and organised around, a more statist-oriented prescriptive approach. An example of this would be the kind of thinking that led to the setting up of the modern welfare state.

Germany under its distinctly non-left-wing chancellor, Bismarck, in the late 19th and early 20th centuries, was the first country to truly implement this idea of a welfare state. As Germany began to overtake Great Britain as an industrial power around this time, sections of the British capitalist class, alarmed by this development, began to take a serious interest in Germany’s state welfare programme. They began to see a connection between this and Germany’s growing industrial strength. Years later, in 1943, the millionaire Tory industrialist, Samuel Courtauld, articulated such thinking when he strongly endorsed the Beveridge Report’s proposal to set up a welfare state in Britain too on the grounds that ‘Social security of this nature will be about the most profitable long-term investment the country could make. It will not undermine the morale of the nations’ workers: it will ultimately lead to higher efficiency among them and a lowering of production costs’ (Manchester Guardian, 19 February 1943).

However, there is always that current of short-term thinking, generated by market competition, against which this longer-term perspective has to do constant battle. Economic boom conditions can, to some extent, shore up the latter perspective, by making state welfare programmes more affordable and, also, by empowering workers in their bid to increase the social wage. But when boom turns to bust as it did in the 1970s, ushering in an era of neoliberal austerity, philanthrocapitalism was then able to play a more prominent role, filling the vacuum created by the retreat of the welfare state. Philanthrocapitalism came to be increasingly identified as the bearer and nurturer of this longer-term perspective which the neoliberal state appeared to have abandoned in its bid to cut costs and restore national ‘competitiveness’. Hence the title of Bishop and Green’s book, Philanthrocapitalism: How the Rich can Save the World, referred to earlier. The thinking behind this was that enormous fortunes of the super-rich to some extent cushioned them from the short-term exigencies of cut-throat competition, giving them the freedom to spend their money on whatever they chose

The economics of philanthrocapitalism    

Though philanthrocapitalists may profess to adopt a long-term perspective of wanting to ‘save the world’, their actions all too often belie the image they are intent upon projecting. Take the case of taxes. While some philanthrocapitalists such as those involved in ‘United for a Fair Economy’ seem intent upon advocating higher taxes for people like themselves, this does not apparently prevent them trying to run their own businesses in a manner deliberately designed to avoid paying taxes as far as possible, knowing full well the fiscal impact of this on a state’s budget and on the state’s ability to fund social welfare programmes.

This incongruity might seem puzzling but it is quite predictable in terms of game theory. Our ‘selfless’ philanthrocapitalists are quite willing to pay more taxes providing everyone else – meaning their market rivals – does as well. Until then, they will strenuously seek to avoid paying taxes as far as possible just like their ‘selfish’ counterparts in the capitalist class (who they will also try to emotionally blackmail through such stratagems as the ‘Giving Pledge’ to ensure the costs of philanthropy are shared more evenly). After all, taxation is ultimately a burden on the capitalist class, not the working class, and the squabble over that burden essentially boils down to a conflict of interests and perspectives between different groups of capitalists over how a capitalist economy ought to be administered.

Tax avoidance, unlike tax evasion, is of course perfectly legal under current legislation. The higher the taxes the stronger the incentive to avoid them, since taxation eats into profit margins and impairs the ability of businesses to compete on an increasingly globalised market. The significance of this to philanthrocapitalism lies in the fact that charitable donations are one of the ways in which the payment of taxes can be avoided.

In America, perhaps contrary to impressions, corporate taxes have been historically amongst the highest in the world (although Trump’s recent tax reform bill will cut these to a level just below the global average as well as reducing some personal taxes). Large US-based transnational corporations are particularly adept at tax avoidance, engaging in such sharp practices as transfer pricing and intra-corporate loans, and being able to employ expensive legal terms to ensure everything appears hunky dory and above board. Huge sums of money are offshored into tax havens or reinvested in other foreign operations. As Farok Contractor notes: ‘The accumulated, but unrepatriated, profits of American multinationals’ foreign subsidiaries—which have legally escaped US taxation—are estimated between $2.1 and $3 trillion’ (Rutgers Business Review, Vol. 1, No. 1, pp. 27–43).

As stated, making charitable donations is just another form of tax avoidance. Indeed, some of the most notable philanthrocapitalists are associated with businesses with a notorious record of tax avoidance. One example is Bill Gates. According to a report by The Independent: ‘Microsoft has reportedly avoided up to £100m a year in UK corporation tax by routing its sales through Ireland’ (19 June 2016). Over £8bn of revenues from computers and software bought by customers in the UK has been diverted to Ireland since 2011, under an arrangement agreed with HM Revenue & Customs.

Another example is Mark Zuckerberg. His corporation, Facebook, has been severely criticised for its tax avoidance stratagems and, like Microsoft, has resorted to funnelling profits through Ireland. In 2014, Facebook paid only a paltry £4,327 in corporation tax on an annual profit of £1.9bn (though the company has more recently agreed to pay several millions in taxes).

The case of Zuckerberg and Gates epitomises a trend in philanthrocapitalism. Instead of philanthrocapitalists giving directly to charities, they are increasingly setting up foundations of their own as a vehicle through which they can exercise ‘social entrepreneurship’, funnelling money to causes of their choosing. Some like Buffet seem to be the exception to this trend. In his case, his charitable donations have mainly gone to the Gates Foundation, the largest of its kind in the world, thereby amplifying its already enormous power and reach.

Indeed, the Gates Foundation is said to contribute about 10 percent of the total budget of the World Health Organisation which, critics claim, gives it undue influence on policy making. In a special report, the ‘Global Justice Now’ campaign group comment on the nefarious workings of the Foundation: ‘We argue that this is far from a neutral charitable strategy but instead an ideological commitment to promote neo-liberal economic policies and corporate globalisation. Big business is directly benefiting, in particular in the fields of agriculture and health, as a result of the foundation’s activities, despite evidence to show that business solutions are not the most effective’ (LINK.).

How philanthrocapitalism goes about financing various causes, gives us more clues as to its real nature and intent.

While attention is focussed on the huge sums of money involved in charitable giving, it is easy to overlook what all that money is spent on. Quite a significant chunk of it is spent, in the first instance, on administrative costs and fundraising (which is, of course, indispensable in a capitalist money-based economy). According to a report by the Daily Mail (12 Dec 2015), one in five of the biggest charities in the UK are ‘spending less than half their income on good work’ and, in a few cases, as little as 1 percent.

It is difficult to avoid the conclusion that many of these charities are little more than a lucrative gravy train for those employed in them. Indeed, the New York Times, (29 March, 2008) refers to a report on the fraudulent misuse of charitable money for personal gain in the United States. The authors of this report estimated that the overall costs of fraud came to a staggering $40 billion for 2006, or some 13 percent of the money given to charity in the US. In early 2007, another report by the Center on Philanthropy at Indiana University (partnered by Google) provided some revealing data on the subject of what charitable money is spent on. According to the report, less than one third of the money that the American public gave to non-profit organisations in 2005 was focused on the needs of the economically disadvantaged. Of the total of $250 billion donated that year, less than $78 billion explicitly targeted those in need.

While we tend to think of charity as essentially an endeavour seeking to ease the plight of precisely those in need, this can be quite misleading. Ginia Bellafante in the New York Times (Sept 8, 2012) notes that:

  ‘Nationally, 32 percent of the $298 billion given away last year went to religious institutions, 13 percent to cultural organizations and 12 percent to social services, according to a report issued annually by the American Association of Fundraising Counsel. But if giving were conducted with the greatest consideration paid to the most urgent needs of the society, then Yale, a private institution with a $19.2 billion endowment, would arguably never receive another 50 cents.’

According to a Wikipedia entry on the billionaire Koch brothers: ‘Charles’ and David’s foundations have provided millions of dollars to a variety of organizations, including libertarian and conservative think tanks. Areas of funding include think tanks, political advocacy, climate change scepticism, higher education scholarships, cancer research, arts, and science’ (LINK). That climate change deniers and the advocates of free markets should count as the recipients of philanthrocapitalist charity speaks volumes as to the supposed efficacy of such charity in addressing the needs of the poor. It is precisely the poor of the Global South, above all, who stand to lose most as a result of the very climate change which its deniers are unwittingly enabling.

However, it is arguably when charitable donations are funnelled into for-profit enterprises that the very term itself becomes most particularly questionable. As Matthew Reiz notes in his review of Linsey McGoey’s book, No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy (2015), there is a long-standing tradition of donating money to for–profit businesses in America and it has become more pronounced in recent years. McGoey’s book gives examples of this such as the Gates Foundation’s donations to Scholastic Inc, a large publisher of education material. Another recipient of the Foundation’s money was a project called M‑Pesa, for ‘which Vodafone and its subsidiaries built, in Kenya and then Tanzania, a system that allowed villagers access to mobile phone banking’ (LINK).

As an article in The Economist put it, one of the things revolutionising American philanthropy is the ‘blurring of the distinction between the profit and the non-profit sectors. In health care, and even in education, for-profit companies are increasingly doing things that used to be reserved for non-profits. And non-profits increasingly model themselves on profit-making businesses. Business schools put on courses for voluntary workers. Non-profits hire managers from the private sector, and pay them accordingly. Some non-profits even charge for their services or spin-off profit-making subsidiaries’ (28 May 1998).

Though the sums of money involved in charity donations are substantial – in America for example, by 2016, total giving to charitable organisations had risen to $390.05 billion, 72 percent of this coming from individuals compared with 15 percent by foundations and 5 percent by corporations and the rest by bequests – it is still small by comparison with state expenditures on welfare programmes. In America, if you include both federal and local government spending, the latter comes to about $1 trillion per year. Given that only a fraction of charitable giving in the US (which itself represents only 2.1 percent of GDP) is actually targeted on the needy this further underscores the utter absurdity of such brash claims about the super-rich wanting to ‘save the world’.

Philanthrocapitalism is not about saving the world. It is about saving capitalism through a face-saving attempt to justify what cannot be justified. It is about promoting the patronising belief that the poor depend upon the super-rich when the reality is the complete opposite.

Robin Cox

Saving Capitalism (2018)

From the May 2018 issue of the Socialist Standard

We begin a four-part series on the ‘philanthrocapitalism’ of billionaires such as Bill Gates

What do you do if you are billionaire and run out of ideas about what to spend your money on? Increasingly, it would seem, the answer is to indulge in philanthropy. ‘Philanthrocapitalism' has today become big business.

In the blurb to Matthew Bishop and Michael Green’s book, Philanthrocapitalism: How the Rich can Save the World, this comment appears:

  ‘For philanthropists of the past, charity was often a matter of simply giving money away. For the philanthrocapitalists – the new generation of billionaires who are reshaping the way they give – it’s like business. Largely trained in the corporate world, these “social investors” are using big-business-style strategies and expecting results and accountability to match. Bill Gates, the world’s richest man, is leading the way: he has promised his entire fortune to finding a cure for the diseases that kill millions of children in the poorest countries in the world.’

That book was published way back in 2008; on 1 January 2018 – that is, approximately ten years later – Bill Gates was listed on the Forbes list of the richest people of the planet, as having a ‘real time net worth ‘of $91 billion, playing leapfrog with Amazon’s Jeff Bezos to become the richest person on the planet. Seemingly, if we are waiting for Mr Gates to put his money where his mouth is, we will be waiting forever.

On the Forbes Website, incidentally, there also appears a quote attributed to Gates as follows: ‘Money has no utility to me beyond a certain point. Its utility is entirely in building an organization and getting the resources out to the poorest in the world’. What that ‘certain point ‘might be he fails to disclose but, presumably, there is still some way to go before he reaches it.

So what exactly is going on here? Why this alleged concern for the fate of the poor by the super-rich and paradoxically in an era that has witnessed a veritable explosion of extreme wealth? According to an OXFAM press release (16 January 2017) a mere eight individuals, almost unbelievably, now ‘own the same wealth as the 3.6 billion people who make up the poorest half of humanity.’ You would think, on the face of it, that global inequality must by now be set on a trajectory of steep decline with all this loose talk of billionaires, stricken by some unaccountable sense of moral angst, giving away their fortunes. But then you would be sorely mistaken.

The truth of the matter is that philanthrocapitalism is not at all what it seems and the disgustingly elitist suggestion that the ‘rich can save the world ‘is as condescending as it is patently absurd. ‘Saving the world’, at the very least, implies some kind of fundamental structural transformation permitting a radical change of direction. Why would ‘the rich ‘want to restructure the world in a way that would prevent this minuscule minority from continuing to enrich themselves at the expense of the vast majority? For it is precisely this class monopoly on the means of producing and distributing wealth that the world needs saving from. That, in essence, is what underlies the multiple problems that afflict it and prevents their effective resolution.

Philanthrocapitalism is predicated on the denial that this is how capitalism operates. Denying it helps to ensure the system’s continuation. In sociological jargon, it deflects attention away from ‘structure ‘– the particular pattern of class relationships linking individuals that defines the social system we live under – to ‘agency’, meaning the individuals themselves, their personality profiles and the inner motives that drive them. The difference between these approaches was rather neatly summed up by the Brazilian Archbishop and ‘liberation theologist’, Dom Hélder Pessoa Câmara: ‘when I give food to the poor, they call me a Saint. When I ask why they are poor, they call me a communist.’

Thus does philanthrocapitalism fail to see the wood for the trees. ‘Saving the world’ from its ideological standpoint, boils down to a handful of individuals being sufficiently motivated and economically empowered to undertake such a project. The focus shifts from those who are ‘given’ to those who ‘give’. The latter’s empowerment is predicated upon the former’s disempowerment and their dehumanisation in becoming the mere objects of charitable display.

We should not be surprised by this. It’s the same kind of top-down arrogant thinking that permeates and informs mainstream politics. Career politicians market and preen themselves on the pretext that they possess certain key qualities that their rivals lack and that electing them will somehow make a difference to the lives of the electors themselves. We all know what becomes of such wishful thinking. The widespread apathy and corrosive cynicism that pervades contemporary society is the direct outcome of the folly of putting your faith in political leaders to lead.

Like the political establishment, philanthrocapitalism is driven by a kind of saviour complex. To that end, it bathes itself in an aura of moralistic self-righteousness and smug do-goodery. That is its defence mechanism, its own way of disarming criticism. How can you possibly criticise your Zuckerbergs and your Bonos when they so obviously mean good? Shame on you.

Why Philanthrocapitalism?
The interesting question is why are the likes of Zuckerberg, Bono and others now so intent on thrusting themselves into our collective consciousness and piously promoting their pet causes? Is there really such a big difference between the philanthropy of the past and modern philanthrocapitalism as Bishop and Green’s book suggests and, if so, how come? According to the philanthrocapitalism.net website:

  ‘Part of the explanation is the surge in entrepreneurial wealth in the last thirty years. Self-made billionaires tend to be more willing to give their money away than those who inherit their fortunes. Entrepreneurs are also, by nature, problem-solvers and relish the challenge of taking on tough issues: for Bill Gates, it is malaria and other infectious diseases, for George Soros it is political change. There’s also a growing recognition that big global problems cannot be left to government alone. Philanthrocapitalists can do the risky, innovative things that government cannot, to find new solutions to problems’ (http://philanthrocapitalism.net).

Let’s take this last point first. The assumption here seems to be that the reason why those ‘big global problems’ persist basically has to do with the particular mix of agents involved in tackling them. Only create a larger space in which our enterprising philanthrocapitalists can bring to bear their own particular brand of ‘innovative’ problem-solving and you are likely to see a good deal more progress being made. What is conveniently overlooked is that the ‘problem’ these entrepreneurs are supposedly skilled in solving is how to make money and augment a corporation’s profits.

It is no concern of theirs that, for instance, the workers made redundant in the pursuit of these profits are now confronted with the problem of how to pay the mortgage and avoid being made homeless. Corporations are obliged to take a narrow self-interested point of view in a competitive market environment – as indeed, to an extent, are charities too in their scramble for funding – but this provides a very poor grounding in which to set out to ‘save the world’. That, one would have thought, minimally implies the joined-up thinking of a holistic approach to ‘problem solving’ that fully takes into account the wider external costs (externalities) of one’s decisions and this demonstrably is not something that the application of ‘big-business-style strategies’ lends itself to.

Criticism
There are other grounds on which these strategies have been criticised.

Firstly, while charities are increasingly forced to compete for funding there is a problem in that you cannot really apply to charities the same criteria as you might in choosing between, say, two different brands of soap powder on the basis of comparative price and quality. Charitable causes are not so easily substitutable. Is combating HIV/Aids more important than building a school or sinking a well in some remote rural village? Who is to say? The application of business strategies to charitable causes tends to override this qualitative issue by subjecting the performance of charities to the same pseudo-quantitative metric that businesses apply to themselves, permitting them to make a choice on the basis of what offers the greatest return on their money. But people remain loyal to their particular pet charities for reasons that don’t necessarily apply when choosing between soap powders.

Secondly, philanthrocapitalist business-style strategies tend to focus on technical fixes, ignoring the socio-economic roots of the problems they seek to ameliorate. Addressing the latter is a much more costly, complex, and time-consuming process and costs are precisely what businesses are intent on cutting. This ‘technicist’ bias is sometimes linked with promoting certain technologies in which the philanthrocapitalist concerned might have a vested commercial interest. In fact, a lot of what is called ‘foreign aid ‘is provided on this basis – to induce a sense of commercial dependency in the recipient country upon the donor country with an eye on future market growth in the former.

Thirdly, there tends to be a marked preference for big organisations in the world of charity, (reflecting the dominance of the large corporation in the business world and their preoccupation with increased market share) in the belief that this makes for economies of scale. As a result many small charities operating on a shoe string get overlooked and starved of funds.

Finally, the provision of financial incentives to volunteers, turning charitable work into paid employment, ironically tends to exert a corrupting or debilitating influence on volunteering. There is also a tendency for philanthrocapitalism to weaken and undermine civil society itself. Grass roots citizen organisations highly dependent on external funding can find themselves subject to a process of ‘co-optation’ and disempowerment. Like the saying goes: ‘beggars can’t be choosers’. Rather, the function of the beggar from this standpoint is simply to passively consume and to exude gratitude for the privilege of being able to do so.

The utter inappropriateness of applying business strategies to social transformation when these different things are each driven by a qualitatively different kind of dynamic was revealingly borne out by Peter Buffett, the second son of billionaire investor, Warren Buffett. Buffet expressed concern that the state of philanthropy in America ‘just keeps the existing structure of inequality in place.’ At meetings of charitable foundations, he averred, ‘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’ (New York Times, 26 July, 2013).

But let us be clear on one point. Criticising philanthrocapitalism does not mean the state is any more capable of solving these problems and, in any event, that is not what socialists are advocating. We argue instead that the problems themselves arise from the very nature of capitalism itself and will persist irrespective of the agents involved in tackling them. Piecemeal welfare reforms enacted by the state will never be enough but nor will private charity. What’s more, there does appear to be an inverse, or zero sum, relationship between these two things. One tends to expand at the expense of the other.

Philanthrocapitalism has often been characterised as a peculiarly American phenomenon. There is some truth in this but we should not imagine that, as a phenomenon, it is confined to the United States. There is a saying that, when the latter sneezes, others catch a cold. America’s cultural hegemony on the world stage may now be on the wane but it is still insidiously powerful and pervasive. This, along with global developments in recent decades – in particular the emergence of neoliberalism since the 1970s and its austere policy prescriptions for pruning back on state spending – have opened up more opportunities for the philanthrocapitalists to muscle in, acting under their own initiative or in concert with their government host.

Free market lobby
According to Mike Konczal, there is in America a powerful free-market lobby that favours private charity not just as a means of filling the obvious gaps in the threadbare safety net provided by state welfare but as part of a wider programme entailing the denationalisation of welfare provision (‘The Voluntarism Fantasy’, Democracy Journal, Spring 2014). We can see how this might serve as a pretext for slashing Federal budgets and by extension, the tax burden on American capitalists. However, the argument, suggests Konczal, is grossly misinformed. It appeals to a rose-tinted vision of America’s past but there never was some golden age of voluntarism, which free market libertarians wish now to reinstate, where society functioned perfectly well without state intervention.

In this context, ‘voluntarism’ denotes not just the charitable act of freely offering time and money to assist others but also the capacity of individuals to take responsibility for their own welfare by exercising choice in the market. This is an extension of the dogma that since we are free to choose whether or not to enter into a particular market transaction, the market itself must, by definition, be a non-coercive or voluntary institution. Workers freely choose to sell their working abilities to their capitalist employer and consequently cannot be considered ‘exploited’. Their labour is voluntary and thus not coerced.

This is yet another example of the failure of a ‘methodological individualist’ approach to see the wood for the trees. Society is seen as simply the sum total of its parts and nothing more. This same approach which vests in a tiny handful of super-rich individuals the power to ‘save the world’ neglects to consider the individual worker as a member of an economic class. For it is the class to which they belong – the working class – that has, as a class, no choice but to sell its working abilities to the tiny minority who own the means of living. That is why the system of wage labour is fundamentally coercive and non-voluntary – not because individual workers do not have the option of choosing which particular capitalist enterprise should exploit them.

The ‘Voluntarism Fantasy’ of the American free-market lobby hinges on what Konczal calls the ‘myth of a stateless nineteenth century’.To the contrary, he argues, the footprint of the state was everywhere in evidence. Not only has the state always been an active player in providing social security but had to expand its role in the face of the clear failure of private initiatives to do the job. This was particularly true in the case of the 1930s Great Depression and also more recently in the case of the 2008 recession and its aftermath when ‘overall giving’ in the US fell away quite significantly – by 7 percent in 2008, with another 6.2 percent drop in 2009 – precisely at a time when it was most needed. In spite of itself and its fundamentally competitive nature, capitalism needs a state to do what is functionally required in order for the system to operate relatively smoothly on its own terms.

Robin Cox

(Next month: The Myth of the ‘Self-made Man’)

Bill Gates on Robots (2017)

The Cooking the Books column from the April 2017 issue of the Socialist Standard

The online magazine Quartz (17 February) put up a video interview with Bill Gates under the headline 'The robot that takes your job should pay taxes, says Bill Gates'.

Gates didn't say anything particularly profound. The point he made was that robotisation would release workers for other kinds of work, but that this would have to be paid for, one source of money for this being a tax on robots, i. e., on capitalist firms installing them. The other kind of work he had in mind was catering better for some particular human needs:

'what the world wants is to take this opportunity to make all the goods and services we have today, and free up labor, let us do a better job of reaching out to the elderly, having smaller class sizes, helping kids with special needs. You know, all of those are things where human empathy and understanding are still very, very unique. And we still deal with an immense shortage of people to help out there.'

It does make sense to use work resources freed up by robotisation to meet these, and other, needs. This is what would happen in socialist society since it would a society directly geared to meeting human needs. But we are not living in socialist society, only under capitalism where this is not the case. So it's not that simple.

Robotisation is no different in principle from the mechanisation that has gone on since the beginning of capitalism. It is, in fact, the latest application of machines to production. Machines have always displaced living labour but, despite dire predictions by some, this has not led to steadily increasing unemployment. Capital accumulation has continued, with the displaced labour (though not necessarily individual displaced workers) being transferred to other industries (making the machines as well as in new industries) and also in the 'service sector'.

This sector includes providers of personal services to workers (and capitalists) for profit, but, also, in large part, services provided by the government and paid for from taxes. Apart from its own administration, national and local, the government provides for health care and education, for the benefit of the capitalist class by providing and maintaining an educated and healthy workforce to produce their profits.

These are part of the necessary expenses of running the capitalist system which capitalists are prepared to pay for out of taxation, which in the end is a burden on their profits. But there are limits. They want these expenses kept to the minimum necessary to benefit them, not to provide an adequate service for workers and their dependants.

Gates favours some of the benefits of the increased productivity that robots bring being used to 'do a better job of reaching out to the elderly, having smaller class sizes, helping kids with special needs.' He should ask himself why this has not happened already. Why are services for the elderly and those with special needs not adequate? Why are there not smaller classes in schools? After all, sixty years ago automation was said to hold out the same promise.

The answer is that capitalism is not a system geared to meeting human needs, certainly not the needs of worker's dependants who don't contribute to production. As a profit-making system, its priority is profits and conditions for profit-making.

Robotisation under capitalism will not benefit people in the way Gates said he would like. The service sector may well expand but mainly for those who can pay. The needs of those who can't will still be neglected and grossly inadequate.

Open Secret (2016)

Book Review from the September 2016 issue of the Socialist Standard

'Wealth Secrets of the 1%', by Sam Wilkin. Sceptre £9.99

There’s no secret, really, is there? The one percent get their wealth by exploiting the rest of us, by paying us less in wages than the value of what we produce. This is not, however, the kind of thing that Sam Wilkin deals with here, since he is really concerned, not with how the capitalist class in general become rich, but with how and why some capitalists, in contrast to others, become very rich indeed. His answer is by ‘gaming the system’: by having the government introduce regulations that make competition difficult, and by making it more or less impossible for companies, especially banks, to lose money.

One chapter deals with the robber barons, the common term for a number of American capitalists who made vast fortunes in the last few decades of the nineteenth century: the likes of Carnegie, Rockefeller, Vanderbilt, Pierpont Morgan. As a comparison, Bill Gates’ wealth is less than one percent of US economic output, whereas John D Rockefeller’s net wealth was nearly two percent of US economic output at the time. The robber barons all despised competition, as it reduced their profits, and were able to acquire valuable patents and enforce vastly-profitable monopolies. For instance, Vanderbilt controlled all the railway lines into New York, while by means of a cartel Rockefeller owned nearly all of the oil-refining business. Morgan’s US Steel made tremendous profits by buying up other steel companies, eliminating competition and keeping prices high.

Wilkin also examines the methods used by Gates and Microsoft, focussing on the way they employed intellectual property ownership to gain a monopoly on some lucrative technologies. Microsoft did not create DOS, the operating system it originally made its money from; it just used its power and cunning to obtain a contract to sell DOS, helped by the fact that Gates’ father was a lawyer, so he had some background in legalese. As Wilkin says, there are two distinct issues: coming up with technological innovations and making money from these innovations are by no means the same thing. And profiting from a technology product has more to do with it being widely used than with it having the best features.

One point that emerges from the book is that there is no basis for claims that capitalism used to operate by means of a free market with unfettered competition, with this having been replaced by crony capitalism, where the state provides licences and protection for some companies. There has always been state interference with the workings of the capitalist economy, and competition has always been limited in various ways.

We mentioned earlier that Wilkin is not concerned with exploitation and the real origin of profit: those who produce the wealth receive little attention here. He does refer to the Homestead strike and lockout of 1892, at the works of Carnegie Steel, in which nine workers were killed by thugs employed by Carnegie and Henry Clay Frick. This is given the euphemistic description ‘an exceptionally heavy-handed crackdown on striking workers’. 

Paul Bennett

Nonprofit Production: Wave of the Future? (2007)

From the January 2007 issue of the Socialist Standard

Each year half a million people in India and other tropical countries catch visceral leishmaniasis, also known as black fever. Infected by the bite of a sand fly, they rapidly weaken and lose weight before dying with painfully swollen livers and spleens.

A safe and effective treatment for black fever was found long ago: the antibiotic paromomycin (cure rate 95 percent). But the firm that developed it -- Pharmacia, a precursor of Pfizer -- shelved it in the 1960s for lack of a "viable market." What that means is that the people who need it cannot afford to pay for it. It is simply not profitable for pharmaceutical companies to fight diseases that afflict the poor. Less than 1 percent of the new drugs developed in 1975-99 were for tropical diseases (Joel Bakan, The Corporation, p. 49).

Lack of effective demand is not the only thing that makes many useful drugs unprofitable. In general, a capitalist firm can only make big profits by selling drugs on which it has a patent -- that is, an exclusive right to make, use, and sell a new product for a certain period (in Britain and the US it is 20 or even 25 years). Firms are not interested in making drugs that cannot be patented.

An interesting recent development is the emergence of a new kind of charity that raises money not just to distribute but to produce things that people need but can't afford. One such organization is the Institute for One World Health (IOWH), founded in San Francisco in 2000 by Dr. Victoria Hale. A pharmaceutical chemist, Dr. Hale had felt frustrated watching the industry abandon badly needed and promising but unprofitable drugs. At about the same time, James Fruchterman, an electrical engineer, set up Benetech, another "nonprofit company," in Palo Alto, California, to produce new types of equipment for the disabled.

The first program of IOWH aims to make paromomycin available to black fever sufferers in the north Indian state of Bihar. The program is being funded (to the tune of $4,700,000) mainly by Bill and Melinda Gates. The Indian government has given its approval and an Indian firm (Gland Pharma of Hyderabad) has agreed to manufacture the drug at cost. Other programmes are planned to tackle Chagas disease, malaria, and diarrhea.

It is hard not to sympathize with well-meaning projects of this kind. But we also have to consider the problems faced by nonprofit organizations as they operate under the constraints of a profit-driven economy.

The first problem is how to raise enough money. IOWH is asking the Gates for another $30 million. They can't take out loans or raise funds on the capital market because that would force them to operate on a profit-oriented basis. But unfortunately only a few of the very wealthy are willing to give to charity on a really major scale and the demands made on those few are legion. And doesn't it seem perverse first to accumulate profit and then use it to ameliorate the ills constantly generated by that same profit-making process? Does the left hand know what the right hand is up to?

It also bears noting that the paromomycin is not going to be provided free of charge. The aim is only to make it as affordable as possible. Dr. Hale hopes to keep the cost down to $10 for a 21-day course of treatment, but the website of the World Health Organization merely says "below $50." We shall see. The point is that in the context of India - and especially in that of Bihar, India's poorest state - these are by no means paltry sums. The average per capita income in Bihar is $120 (5,500 rupees) a year. As the distribution of income is highly unequal, even $10 will be well beyond the means of many sufferers.

In his enthusiastic report in the Guardian Weekly (October 20-26, 2006, p. 29), Ken Burnett asks why nonprofit pharmaceutical companies should not be followed by nonprofit seed companies, water companies, travel companies, and so on. Why not, indeed? But if this is supposed to be a process that develops under capitalism, we can't avoid asking: "Where is the money coming from?" So far all we have is one small nonprofit pharmaceutical company and one small nonprofit engineering firm.

Nevertheless, it is encouraging to see people trying to move in this direction, people who crave meaningful work for the benefit of the community. The very existence of nonprofit companies is a protest against and challenge to the system of production for profit. We would only take the argument to the next logical step. Why not extend the principle of production for need to the world economy as a whole?

S. Shenfield

Baron Rothschild rides again (2006)

The Cooking the Books column from the July 2006 issue of the Socialist Standard

According to the Times (13 May), the Rothschild dynasty is to invest again in Black Sea oil from which they were ejected after the Bolshevik coup in 1917. In the 19th century the Rothschilds were often regarded as the archetypal capitalists. To be honest, this wasn't entirely free from anti-semitism. Even Paul Lafargue, who was married to one of Marx's daughters, was not immune from this.

But if, as the pre-WWI German Social Democrat August Bebel remarked, "anti-semitism is the socialism of the fool", then a leading contender for the prize of biggest fool must go to the anarchist and comic opera revolutionist Bakunin who wrote in one of his polemics against Marx:

  I am sure that, on the one hand, the Rothschilds appreciate the merits of Marx, and that on the other hand, Marx feels an instinctive inclination and a great respect for the Rothschilds. This may seem strange. What could there be in common between communism and high finance? Ho ho! The communism of Marx seeks a strong state centralization, and where this exists, there the parasitic Jewish nation - which speculates upon the labour of people - will always find the means for its existence (quoted, Polemique contre les Juifs, 1872).

On the other hand, F. A. Sorge, who was one of Marx's correspondents in America, recounted the following anecdote concerning a member of the dynasty:

  One day in 1848, as the story goes, Baron Rothschild took a walk on the Common of Frankfort-on-the-Main. Two labourers met him and accosted him thus: 'Baron, you are a rich man; we want to divide with you.' Baron Rothschild, not the least puzzled, took out his purse good-humouredly and answered: 'Certainly! We can do that business on the spot. The account is easily made. I own 40 millions of florins; there are 40 millions of Germans. Consequently each German has to receive one florin; here is your share;' and giving one florin to each of the labourers, who looked at their money quite confused, he walked off smiling" (Quoted here).

The point Sorge was making is still valid. Bill Gates could behave in the same way today. One estimate of his personal wealth is $100 billion. The world's population is about 6.5 billion. So, if similarly accosted, the amount he would give would be $15. Even if only the US population was concerned they'd get only $333 each.

Contrary to a widespread belief, socialism is not about equal sharing or redistributing wealth more evenly. Its about the common ownership of the means of wealth production. Which is a different proposition altogether. These means are already a single integrated network operated collectively by the whole working class, but they are owned separately, whether by rich individuals, capitalist corporations or states. Its not a question of dividing them or their monetary value up amongst the population but of making them the common property of all.

On this basis they can be used to turn out what people require to satisfy their needs and to which everyone can have access to satisfy those needs in accordance with the principle "from each their ability, to each their needs". Because people's needs are different so will be what they take and use. But everyone will have an equal right to satisfy their different needs. Thats what socialism means, not sharing out the wealth of Bill Gates, the Rothschilds or other wealthy individuals.