Monday, June 26, 2006

A Concern over a Philanthropic Superfund

So, I read in the papers that the second richest man in the world has been overtaken by a bout of philanthropy and decided to give his vast fortune away . . . to the richest man in the world. Warren Buffett will be giving away his vast accumulation of wealth by donating it to the Bill and Melinda Gates Foundation.

Bill Gates, in turn, is retiring from Microsoft so that he can focus on running his Foundation full time -- putting his business skills to work in the private charity sector.

Clearly, this is admirable. It is a bit difficult to maintain the bigotry (and it is, in fact, bigotry) that corporate leaders are inherently evil when the vast majority of their wealth goes into establishing and maintaining services to the poor. (The Bill and Melinda Gates Foundation is devoting most of its resources to fighting diseases such as AIDS and malaria in third-world countries, particularly Africa, and in promoting high-school education.)

Buffett chose to give his money to the Bill and Melinda Gates Foundation for a reason -- it was the only charity that could handle such a large influx of new wealth. Any other organization would have had growing pains as they grew to handle the new wealth.

Yet, I do think that there are a couple of dangers here.

The first danger comes from having so much power (and wealth is power) in so few hands. Regardless of what I may think about the merit of this Foundation's work, I know that there are a lot of people out there who are just aching to get their hands on nearly $100 billion in wealth. They can well imagine what they can do with that type of wealth, advancing those causes that they think are worthy of advancing.

It is not at all difficult to imagine an organization, filled with zealous devotion to some ideal that they have pledged themselves to accomplish, struggling to take over the wealth of a foundation such as this. We see something much like this in the way the Religious Right has taken over the Republican Party as well as several once-moderate churches. The begin by getting one or two of their members into positions of power, and then they use the leverage that these people have to pull others into powerful positions, until they control the organization. This does not require an elaborate conspiracy theory. This simply requires a group of people with common aims, a lust for power, and an unflinching dedication to getting what they want.

In this case, the power of having control of nearly a hundred billion dollars would provide a lot of motivation. We would be foolish if we did not expect a power struggle for control of this money that is little different from the power struggle we see to control existing governments and churches.

Eventually, that power will end up in the wrong hands. The wrong hands, with that much power, will be able to do tremendous harm.

One way to avoid this danger is to lock the Foundation on a particular course so that power-hungry individuals cannot hijack it. This means that, no matter who takes over the Foundation, they will not have the liberty to do as they please with the money. They can only pursue the original intent of that foundation.

This option suffers from its own problems.

The first risk is that the original intent is not worth the effort. We can imagine, for example, an ante-bellum Southern aristocrat establishing a Foundation for the Promotion and Expansion of the Institution of Negro Slavery. If the foundation is incapable of changing its charter as time goes by, then the funds will continue to be dedicated to this objective long after rational people have identified the objective as unworthy of support.

The second risk does not require that we imagine that the original intention of the Foundation is bad to be able to imagine where poor flexibility leads to bad consequences. Think of a Foundation, for example, strictly concerned with finding a vaccine for Polio. The vaccine has since been found. If the Foundation is fixed on one project in order to prevent it from being hijacked, it may find itself poised to solve problems that do not exist, while new problems are under-funded. On the other hand, the ability to change course leaves the Foundation vulnerable to being hijacked.

In addition to bad objectives, or objectives that become bad as the world situation changes, people simply have an uncanny ability to ignore rules they do not like. The Bush Administration has shown us how easy it is for those in charge to ignore the plain text of a charter or Constitution by simply deciding that they will no longer follow its requirements. Plain-text rules such as "no search or seizure without a warrant" and the invention of "signing statements" that allow the President to rewrite any law he does not like before signing it are tools that can also be put to work against the bylaws of any Foundation.

So, we are stuck between a flexible Foundation that can be hijacked by those who have less than admirable intentions for their use of the money, or an inflexible Foundation whose objectives are bad, or start out good and become outdated, or are ignored by power-hungry individuals who simply decide to ignore the charter.

One way to avoid this dilemma is to simply be aware of the dangers of putting too much power in too few hands. This is the same argument that suggests that rational people adopt a government whose powers are divided among different branches, where each branch has the power to check and balance the powers of the other. In this case, we are talking about a division of wealth so that no self-important person or group can hijack the whole sum for his or her personal project.

I am more than pleased with what Bill and Melinda Gates and Warren Buffett have decided to do with their wealth. I hope that others follow suit. However, I sincerely hope that they do not follow suit in a way that puts all too much wealth and power into too few hands. Eventually, that wealth and power is going to end up in hands of somebody who lack good intentions, at which time the wealth and power will be doing more harm than good.

I actually have no idea what type of charter Bill and Melinda Gates have set up. I hope that they were smart enough to realize that, after they had gone, others may divert their great wealth to the interloper's own pet projects. I think we are foolish if we do not anticipate the fact that creating the largest private accumulation of wealth in one foundation will generate a great deal of political conflict over who gets to control that power, and that conflict will inflict its own costs.


Derek Scruggs said...

"The wrong hands" is in the eye of the beholder. If you ask my some right wingers, the Ford Foundation fell into the wrong hands long ago. Not that I agree, but still...

Hume's Ghost said...

Buffet's donation will have have caveats attached, where the money will be withdrawn if certain requirements aren't met.

Sidestepping the point of your post (sorry), I've been following the Gates Foundation for a while now, and I must say that they do very commendable work. Another interesting project set up by Gates is a series of experimental public schools.

Alonzo Fyfe said...

Derek Scruggs

While it is true that people will have a difference of opinion as to what it takes for this money to be "in the wrong hands," this forum is founded on the idea that some opinions are better than others.

For example, $60 billion dedicated to fighting AIDS is Africa is better than $60 billion dedicated to fighting religious wars in Africa.

Hume's Ghost

I am, indeed, extremely pleased with how the Bill and Melinda Gates Foundation spends its money. My concern is not with what they are doing with the money now.

My concern is that there is a strong incentive for others, whose objectives are less noble, to do what they can to gain control and of this $60 billion and direct it to less worthy causes. It is a concern to avoid a possible future in which this money does more harm than good.

Hume's Ghost said...

I knew that. I just didn't have an answer, which is why I side-stepped the issue.

I'm not sure what to do, other than to hope Melinda and Bill do everything possible to make sure that the people who work at the foundation after they are gone are virtuous and will continue the good work.

Eneasz said...

I'm not sure I understand what appears (to me) to be an unreasonable fear of all power. I don't think the potential for abuse is a valid argument against power in general. For example, while I despise the current spying programs of wire-taps, phone call databases, and funds monitering, I despise them because they were done secretly, without permission, and without oversight. If these programs were disclosed, and an oversight commitee was in place, I would consider them very valuable tools. They have the potential to be abused by evil men, yes, but so does anything. One could argue that a general who commands the loyalty of his troops is in a position of far greater power than all three branches of the government combined. But we do not fear that power, for it is controlled. If we can give one man the power to command thousands to kill and destroy, without fear on our part, we should have no qualms about giving a body of people the ability to listen to phone calls and search through databases. In both cases these powers are good when controlled, but dangerous when abused.

And obviously, no safegaurds put in place to prevent abuse are perfect. Our government's system of checks and balances is(was) truely amazing, one of the best checks on abuse of governmental power that man has created. Yet the current administration has shown how even these precautions can be overrun and power abused without fear of reprisal. This does not, in my opinion, constitute a reason to eliminate the presidency or its powers.

Likewise, this charity foundation is now in possession of a lot of power, but I don't see that as anything to be worried about in itself. If Gates and Buffet had never donated any money, and instead worked together to achieve thier own goals, they would be just as powerful, if not moreso. Instead, placing the money in a foundation run by a group of people, which publicly records its assets and expenditures, seems like a MUCH better way to prevent the abuse of this power than if they had kept that money for themselves. If anything, donating this money to the Gates Foundation would make it harder to abuse this power, not easier.

Anonymous said...

Buffet's money goes to The Gates Foundation at 5% per year contingent on either Bill or Melinda being in charge of the Foundation. If both are removed for whatever reason, the money is redirected to a different charity each year for the remainder of the 20 year payments.

I read a lot about it yesterday, and i think that was from a UK Independent article. I'm lucky to live in a city (Boston) with two newspapers, even if one is the paper version of Fox News and the other is a photocopy of the Times. However, the Independent is some great reporting and reasoned editorial if you get a chance to look it over.

ps. I saw that Reason was hiring and I suggested they contact you, some original thinking would go along well with their rah rah lolbertarianism.