Big Philanthropy Is a Scam - Here’s How

This op-ed argues that the world’s richest people aren’t going to save us.

Every couple of years, a very wealthy, prominent individual dominates the headlines, having boldly vowed to give away their fortune to fix the crises of our time. A cynic might say they’re merely patching up problems of their own creation. Despite the glaring hypocrisy, a halo effect takes hold, allowing those who benefit most from deepening inequality to rebrand themselves as saviors.

Many people have come to view big philanthropy as a bit of a scam. Bound up with the money and interests of the ultra-rich, it serves to cement their status as beneficiaries of an unjust economic system. In more ways than one, billionaire benevolence is an exercise in self-enrichment. It launders reputations and can conceal some unsavory practices used by the powerful, who can maximize profits by presiding over questionable working conditions, engaging in union busting, or lobbying for health care costs to remain high.

So, is the friendly face of capitalism as saintly as it seems?

Big Philanthropy, Small Change

Philanthropy sounds lovely. It conjures an image of a generous donor supporting causes for the public good. And sometimes that holds true. It can foster truly life-changing humanitarian work, driven by the best of intentions. But the bigger picture is much murkier.

While half of the world struggles on $6.85 a day, according to the World Bank, an Oxfam report noted that billionaire wealth has increased as much in 24 months as it has in 23 years. As the fortunes of the super-rich have swelled, so too has the number of philanthropic foundations. Globally, there are more than 260,000 foundations holding a combined $1.5 trillion dollars, ready to spend as a select few individuals see fit, regardless of whether or not they represent and nourish the needs of the broader population.

A ballooning philanthropic sector is not just a symptom of acute inequality — it can actively perpetuate it. Spectacular charity is used to legitimize a lopsided distribution of resources. Philanthrocapitalists can claim to transform the world whilst changing nothing much at all, allowing unimaginable wealth to continue concentrating in the hands of the few. By applying neoliberal market logic to the charitable sector - that of a “free economy and strong state” - we see state-corporate partnerships forwarding a fraction of corporate profit to causes that ease social ills, legitimizing the system that exacerbates the very inequalities it seeks to remedy, whilst preserving a bottom line for big business. This way, mega-donors can benefit from a self-serving redemption arc that says “doing well by doing good” means leaving their core interests perfectly intact.

In his book Winners Take All: The Elite Charade of Changing the World, journalist Anand Giridharadas pulls back the curtain on an industry of think tanks and consultants dedicated to propping up this particular framing. He describes a consensus among thought-leaders that says: “The winners of our age must be challenged to do more good. But never, ever tell them to do less harm.”

Blockbuster giving can secure good PR for the top 0.01%, a group whose spectacular wealth is wedded to spectacular annual investment emissions, placing them among the top polluters on the planet. Philanthropy’s sheen of social superiority can do a lot to deflect scrutiny on unsavory business practices. By appearing to take a proactive stance on social or environmental issues, they might fend off more rigorous regulation down the line, or get their preferred climate solutions bankrolled by public money.

The Cost of Big Philanthropy

The tax benefits granted by philanthropy can help the wealthy maintain their fortunes. While traditional non-profits and charitable foundations tend to be governed by strict laws to curb conflicts of interest and political influence, many mega-donors now opt to pour their money into LLCs or Donor Advised Funds (DAFs). With opaque structures that avoid public scrutiny, these entities have no minimum distribution requirement and allow donors to invest in for-profit business or engage in lobbying, Linsey McGoey, Darren Thiel and Robin West write in their essay Philanthrocapitalism and Crimes of the Powerful.

Often referred to as checking accounts for charity, DAFs allow donors to make a flashy contribution, take an upfront tax deduction for the full value, then leave the money in the account indefinitely. LLCs, meanwhile, have no minimum distribution requirement, no obligation to make tax filings public, and crucially, no restrictions on gift-giving that directly profits the donor. Shrouded in secrecy, there’s little way of knowing how much good their grand gestures are actually doing.

Democracy in Decay

Philanthropy is another currency with which elites exercise soft power without the demands of public office. That’s because philanthropy doesn’t just mean supporting humanitarian projects. It can also include donations to groups that advance social and political causes, cloaked by the language of “doing good.” Here, big philanthropy runs into tension with democracy and can quietly undermine it.

Donating to 501(c)4 organizations is one way to wield influence anonymously. Classified as tax-exempt non-profits that promote social welfare, 501(c)4s can play a powerful role in politics while concealing the identities of patrons. In practice, this allows deep-pocketed donors to hand vast amounts of cash to organizations that promote a particular political agenda, without being seen to contribute to a campaign. Some argue the relatively elastic regulations of 501(c)4s allow “dark money” to stream into politics.

Franklin D. Roosevelt cautioned the ill effects of consolidated wealth and power, “We know now that Government by organized money is just as dangerous as Government by organized mob.” The priorities of the rich often differ from those of the general public, and in many cases their interests conflict. Plutocratic philanthropy is at odds with democratic governance and ill-equipped to solve structural problems.

Philanthropcapitalism Will Never Save Us

Some say we should be grateful for any display of generosity — that the world’s richest people might not be so charitable if they had to contribute more in taxes. But we’d be wise to reject this reasoning, not least because the evidence doesn’t back it up. According to Giving USA: The Annual Report on Philanthropy, charitable giving by individuals reached an estimated $319.04 billion last year. This pales in comparison to the $2.6 trillion collected by the federal government through individual income taxes. Even in the case of corporate giving, philanthropy fails to fill in where tax loopholes are exploited; according to an Oxfam report, the U.S. government is estimated to have lost $135 billion in revenue due to corporate tax avoidance in 2017, while corporate philanthropy amounted to less than $20 billion that year.

Any robust democracy must ask why big philanthropy is filling the vacuum of solid tax policy. That it’s even needed is a shameful failure of political imagination. Closing loopholes on corporation tax and levying a progressive wealth tax would better address the need for redistribution in a way that’s accountable to the public. And to ensure tax spending aligns with public priorities, we need more democracy, not less. As long as we’re reliant on the good will of the wealthy, big philanthropy will always have strings attached.