Dan Palotta’s latest book “Charity Case” has rocked my idea of what could be done if giving to humanitarian organizations could be improved by just 1% nationwide. He also offers cogent ideas about doing that, and reasons for why we incorrectly evaluate the impact of charity by how money is spent on everything other than measurable progress towards a humanitarian goal. I recommend it highly, but that’s not the point of this blog.
It turns out that, the more people have, the more they feel free to give. I know homeless folks who knowingly give away anything extra they have just to benefit their friends. A homeless buddy of mine bought a six-pack of beer and gave away most of it. Yes, being homeless puts my friend closer to the need, but which of us, if we had $60,000, for example, would give away all but $20,000?
I wish we could talk generosity on that level. I don’t mean calculating all the costs of earning $60,000 and the tax benefits of giving most of it away — it’s the ratio of giving two thirds of every dollar to those in need that interests me. That’s real giving. And impractical under the circumstances. But do you see why that matters? My homeless friend is giving at a level — a rate, if you will — that is far more munificent than the level — or rate — of all of the funds donated to humanitarian causes.
Somewhere around 2% of gross domestic production is given to charity each year, not 66%. It’s been that way for almost half a century. During that same period of time, the government has been taking more and more control of more and more humanitarian organizations, which of course costs taxpayers more and more each year. For example, America’s ability to vote for more and more government programs that cost more and more each year is offset by America’s need for the many humanitarian organizations which fill the holes in the government programs. It’s obviously a self-defeating zero-sum game when viewed that way: earn, be taxed and fund an OK government program; give to charitable programs that augment the government program. As government’s needs increase, so do taxes, which are paid first. Less is left over for generous giving as the earner/taxpayer/giver feels the economic squeeze and therefore gives less.
I believe there’s another answer, more in line with giving 66%: Let’s become more prosperous.
America, for example, could elect a government that was all about inspiring new entrepreneurial businesses and making it simple for them to start and sustain themselves. This is the start of prosperity: unleashing aspiring creators to launch sustainable enterprises. Enterprises that can be sustained employ people. There’s a huge opportunity right now for entrepreneurs to solve the environmental and social problems of the world and America just isn’t the financially attractive or regulatory low-impact place to start a business to do that. But that could be changed by Americans.
More prosperous people means fewer poor people. We know this from American economic history. Adjusted for inflation and measured in constant dollars, American incomes have done nothing but rise over the long term. America’s poor are still wealthier than most the the world’s poor.
Instead of demonizing them, the world could learn some lessons from the mega-wealthy about how to be prosperous. We might learn that the creation of real wealth involves hard teamwork and compassion. We might be able to correct the misdirection that there’s not enough wealth to go around so those at the top must have stolen it. Prosperity rests on the assumption that someone is willing and able to make an exchange with you for something you offer. Offer the world enough and you can be quite prosperous. Build a large and willing team to do that and many people can prosper along with you.
My hope is that more people who are more prosperous will give us a shot at raising the bar on giving. Maybe by more than 1%. Imagine if we could raise it to 5%.
With that kind of charitable giving, humanitarian organizations in medical and therapeutic fields, educational institutions, environmental causes, social entrepreneurism, the arts, research — nearly every giving-based organization — used to raising $1 could potentially raise $5. That would change the game. Government humanitarian programs might become obsolete as well-funded NGOs surpass them in excellence, innovation and value.
To me, creating this kind of prosperity sounds like a real solution to the humanitarian ills that ail us. This can’t be done by printing more money. Instead, let’s enable our best and brightest to create organizations that address humanitarian issues through innovative ideas valuable enough to export profitably. Let’s clear the way for investors rather than donors to back low-profit social-venture businesses so that they can scale big enough to have meaningful positive impact.
Clawing at the ultra-wealthy won’t create more wealth.
Unlike natural resources, wealth-producing ideas are not zero sum. They are all around us ready to be put to work. Let’s get great ideas working, exchange them for what we need, and help raise everyone’s wealth just a bit. Then let’s encourage everyone to become a donor to their own favorite charities in a way that will truly make a difference.