It is time to take the full measure of the difference UHNW philanthropy can make at a time when there's much discussion about inequality and the very different ways people have been hit by the pandemic and associated disruption to normal life.
A regular complaint made by some politicians and commentators is how the past few years have seen a rise in wealth inequality. Differences have been aggravated by central bank money printing (quantitative easing), which has benefited holders of certain assets at the expense of savers in cash, and the pandemic has tended to shift wealth towards Big Techs and certain business sectors at the expense of others. Quite how much the differences are wider than, say, they were 50 years ago in developed countries is a matter of debate. For example, if one takes a snapshot of wealth holdings, there will always be inequalities, but if one takes into account how people typically accumulate assets over a lifetime, the figures might not look as striking. (This question may also explain why inter-generational inequality is arguably a pressing issue.)
And, of course, how one responds depends on what sort of inequality is being discussed: not everyone agrees that inequality of outcome is a matter of justice that requires correction, while inequality of opportunity is.
How does philanthropy fit into this debate? Can it be a way to push back at complaints and do some good at the same time, or is it a ploy to divert concerns about the matter? To discuss the issue is John Canady the CEO of the National Philanthropic Trust UK. The editors are pleased to share these views with readers and invite responses. The usual editorial disclaimers apply. Jump into the debate! Email firstname.lastname@example.org and email@example.com
As governments around the world unveil recovery plans following the COVID-19 crisis, we are reminded how the pandemic has polarised opinions over the distribution of wealth even more.
The UN Secretary General Antonio Gutteres recently urged governments to impose a wealth tax on rich people who have profited during the pandemic. On that theme, President Joe Biden has targeted the wealthiest one per cent with higher taxes in an effort to raise more than $1.5 trillion over the next 10 years for education and childcare among other reforms. In the UK, while calls for a one-off wealth tax have gained ground, they have so far been resisted by the Chancellor of the Exchequer Rishi Sunak.
The figures laid bare in last weekend’s Sunday Times Rich List will no doubt compound the debate about the contribution of the wealthy elite. According to the list, Britain created more new billionaires during the pandemic than in any year in the last three decades, with the combined fortune of the UK’s 171 billionaires rising by 22 per cent on the previous year to £597 billion ($845.9 billion).
Reports that the world’s richest have become wealthier during the pandemic as millions have fallen on hard times may be a bitter a pill to swallow. When viewed in such black and white terms, it is understandable that wealth or billionaire taxes are seen as a popular choice. While it isn’t for me to weigh in on the fiscal merits of specific tax changes, I would like to see a balanced discussion about wealth and, in particular, about philanthropy, which is all too easily written off when the highest earners in society are under the spotlight.
The lesser known Giving List, also published by The Sunday Times, shows how philanthropic activity has accelerated in response to COVID-19. Charitable donations by high net worth individuals in the UK over the last 12 months exceeded £4 billion, a 36 per cent increase on the previous year. In the US, it is also reported that more than $20 billion was awarded to COVID-19 causes globally in 2020, with $6 billion donated by high net worth individuals.
Granted, these figures may not match the amounts that could be raised by various forms of wealth tax, though the assets of the super-rich are often mobile. The most impactful forms of philanthropy, however, are about much more than a lump sum of money. The real impact lies beyond the figures and in efforts to drive social change. My positive view of HNW giving is formed through my role managing charitable funds for philanthropists and family offices around the world. I regularly see examples of how the impact of philanthropic activity is greater than a single financial contribution that’s comparable to, say, a wealth tax paid to the government.
First, philanthropists are willing to take risks to target long-term systemic change in a way governments cannot. I am encouraged by the emerging trend of combining philanthropy with activism, especially among next-generation leaders who are using their philanthropic capital and connectivity to tackle social issues in innovative ways. The Manchester United footballer Marcus Rashford, who topped the Giving List, has rightly been praised for his role in addressing food poverty in the UK and forcing two government U-turns on the issue. The impact of his campaigning, which also inspired countless others to donate to the cause, far outweighed the personal financial donation he initially made. The next generation of givers are happy to challenge the status quo and those in power if they identify a cause that they are passionate about.
Second, philanthropists provide much needed support for the struggling charity sector, which plays a vital role in the fabric of our society. Pro Bono Economics has calculated that charities in the UK are facing a £10 billion funding gap, at the same time as demand for their support has risen sharply. COVID-19 has crippled part of the charity sector, with charities relying on the agile response from philanthropists to support everything from local community rapid response funds to international vaccine development programmes. I have no doubt that society will be weaker if charities, whose services fill the gaps that government resourcing can’t (or won’t), are left to go to the wall. Without generous philanthropic benefactors, there is a real chance of that happening.
Finally, private philanthropic capital strengthens government funding. The investment required to address the major issues we face today - including social justice and the climate emergency - go beyond the capacity of any single government. When government and philanthropic organisations work in partnership, projects are usually more innovative and delivered faster. Under these types of partnerships, philanthropic organisations attract other long-term private sector funding, resulting in projects having a stronger chance of success, rather than being tied solely to government policies which change depending on who is in power. The Gates Foundation’s work is the best example of creating successful public-philanthropic partnerships, but I have worked with many others, notably in the US and Gulf countries.
This is not a blanket defence of the wealthy elite. I understand it can be easy to scapegoat the one per cent, especially when global inequality has been exposed during this crisis. Nor am I suggesting that philanthropy should ever replace taxation. But the philanthropic activity of the super-rich is evolving and often has a much deeper impact than a simple financial donation. As we race against time to address major social issues and heal society which has been battered and bruised from COVID-19, then that is surely something worth noting.