Philanthropy and the One Percent
Reckoning with the conspicuous philanthropic acts of the wealthy
Posted Oct 01, 2013
At a time when inequality of income and wealth is at an all time high, with the top one-percent of wealthy households having more net worth than the bottom ninety-percent, behavioral changes have been observed in many of America’s wealthiest. A spotlight has suddenly started shining on this one percent, and some have become highly motivated to do incredible giving, and in the process, are evolving the dynamics of wealth accumulation and allocation. Can motivations be hypothesized for such conspicuous philanthropy?
Two years ago, an earthquake hit Washington DC that damaged the Washington Monument. David Rubenstein, billionaire and self-proclaimed “patriotic philanthropist,” offered to pay for entire cost of the restoration of the architectural icon, but Congress chose to split the costs with Mr. Rubenstein, assuring the government’s participation in such a high profile endeavor.
Consider the social behavior of David Rubenstein: a handsome, charismatic, and engaging man who earned his vast wealth as a cofounder of one of the largest and most powerful private equity firms in the world: The Carlyle Group. This highly connected company owns the majority of Booz Allen Hamilton, a long-term contractor for defense and intelligence, which runs much of the National Security Agency, which, among other things, is undergoing a lawsuit regarding accusations of illegally collecting information on private citizens. In June 2013, Bloomberg Businessweek called The Carlyle Group “the world's most profitable spy organization.” Booz Allen Hamilton reported at the end of March this year that, of its $5.76 billion in revenue, ninety percent came from government contracts primarily regarding intelligence gathering, thus making $2 billion for Rubenstein’s Carlyle Group.
But Rubenstein was one of the first to sign the Giving Pledge, a commitment to donate half or more of his wealth to philanthropic causes, alongside the notable Bill Gates and Warren Buffet as well as more than a hundred others. So shouldn't we trust him?
He believes in “patriotic philanthropy,” a term he’s created to advocate for giving back to one’s country. For him, this means the preservation of America’s iconic historicity, which he enthusiastically promotes during his circuit of lectures to the public. He speaks spiritedly about his notable deeds in saving important historical documents like The Magna Carta, two copies of the Emancipation Proclamation, and the Thirteenth Amendment. This citizen-historian tells the tale of how he rescued The Magna Carta from an auction where he says it was predicted that the likeliest buyer would take it out of the country. It now sits proudly in The National Archives for the entire country to see. One copy of the Emancipation Proclamation now hangs in the Oval Office, and the other, along with the Thirteenth Amendment, went to the Smithsonian’s African American History and Culture Museum—all thanks to Rubenstein. This high-profile approach signifies to the populace an image of Rubenstein as a Great American Patriot. However, he professes otherwise and has been quoted saying that the true patriots are the soldiers sacrificing their lives on the front lines, not those who write the checks. Why, then, the term “patriotic philanthropy?”
Research has shown that this kind of overt and public philanthropy, considered income signaling, all depends on the individual, their personal assets, and their motivating desires—i.e. love, respect, or power. It has been theorized that in large economies, such as ours, only the wealthiest are able to actively and consistently contribute to the public good (Andreoni 1988). Our country, however, has a long history of altruistic behavior that has existed at every economic level. Giving has been a moral imperative of being an American, no matter the individual’s socio-economic status or heritage. In some cases philanthropy are still tied to a variety of religions; the Tithe tradition for Jews and Christians is ten percent. Islamic law requires two and a half percent of personal wealth be given. None of us would deny the very real good that’s brought about by big charitable acts and the philanthropic behaviors they inspire in others, but we can, and should, consider the motivations. When should we begin to consider philanthropic acts as suspect?
Acts of magnanimous giving by extremely wealthy individuals aren’t performed in social isolation but are often dominated by interwoven influences and social pressures, the need to distinguish his or her standing, gain adoration in the public sphere, and communicate superior valuation to their peers. In the paper “A Signaling Explanation for Charity” by Amihai Glazer and Kai A. Konrad, they consider how giving fits into a person’s “utility function.” Conspicuously consuming luxury goods (multiple homes, expensive cars, private jets etc.) may only be permissible alongside charitable donations; without them, an individual within the evolving one percent may not be allowed to “socialize with individuals of the same or higher social status.” Glazer and Konrad don’t see these actions as ones for the greater common good. We might wonder if Mr. Rubenstein is diverting the public’s attention from the questionable source of his profits and the non-democratic behavior of the company he cofounded. Is he throwing up a sort of “philanthropic smokescreen?”
Robert Payton, founder of the Center of Philanthropy at Indiana University, believed that philanthropy and patriotism “need each other,” but not necessarily in the way Rubenstein might have us believe. Payton identifies Alexander Hamilton’s Federalist-era writings as the first time “philanthropy” and “patriotism” was used together, and it was for the purpose of helping the new democracy succeed. Rubenstein appeals to our American pride and emotional connection to stories of heroic gestures when he tells us the tales of saving historic icons that represent our democratic principles, but, according to Payton, “Philanthropy is not true to itself or to its mission simply because it declares itself to be so.”
We must begin to question whether some so-called philanthropists are actually taking away more with one hand, while returning what we should already posess with the other.