There was a time when I felt warmly toward the Frick Collection. I was a teenager when I first visited the mansion-turned-art-museum on New York’s Upper East Side. Around every corner was a painting that I had seen before in school or books—Hans Holbein the Younger’s 16th-century portraits of Thomas More and Thomas Cromwell, El Greco’s St. Jerome, the Vermeers. I did not know much about the paintings, or what they had to do with each other, except that they were all so important. And there they were, all together in this benefactor’s home, arranged (except for the gift shop and ticket desk) as if he still lived there. What a guy.

Last time I visited, I experienced the place quite differently. I had spent some of the intervening years reporting on social movements for a living, witnessing the violence and other forms of repression frequently wielded against those who take stands for their own dignity—as workers, as students, as migrants, as neighbors. I had learned that the history of my subject included Henry Clay Frick. During much his life, the public imagination associated his name not with famous art but with the breaking of the Homestead Steel Strike in Pennsylvania in 1892, a deadly operation that involved the use of Pinkerton mercenaries and the state militia. Mr. Frick spent most of his life organizing the production and sale of steel and other industrial products. Fine art was, in comparison, a hobby. Yet now, nearly a century after his death, certain masterworks can be viewed only by paying a visit to his home, frozen in time, where they are indefinitely imprisoned.

Frick-like behavior is such a familiar feature of cultural and economic practice in the United States that we rarely pause to question it. Mr. Frick was not alone. His contemporaries, like Andrew Carnegie, J. P. Morgan and Leland Stanford, had philanthropic hobbies of their own, in some cases to greater effect. Each found ways of wiping away spotty business reputations with unrelated beneficence, supplanting the public ambivalence or notoriety they had accumulated in life with enduring gratitude in death. Like feudal lords endowing monasteries, they bought themselves a measure of salvation in the afterlife—and we continue to let them do it.

We like to think that the selling of indulgences was an error of the past, yet the practice has passed into secular forms, and there are few Martin Luthers complaining of it.

We like to think that the selling of indulgences was an error of the past, yet the practice has passed into secular forms, and there are few Martin Luthers complaining of it. What goes by the name of philanthropy—literally, the love of people—and what the tax code regards as giving can rival the cynicism of the feudal indulgence business.

Microsoft Windows remains the world’s most widely used desktop computer operating system, but its chief salesman, Bill Gates, is now best known in relation to matters like health care, combatting disease in Africa and school reform. There is no question that Mr. Gates has proved his skill in turning buggy, insecure software into a global near-monopoly. Less clear is the meritocratic rationale for why this man’s foundation should rival the power of the World Health Organization, which is at least partly accountable to elected governments. One might also ask why a private-school-educated college dropout skilled at selling software holds singular influence over the future of the U.S. public school system—which his foundation consistently steers in the direction of Microsoft products. Yet long after anyone remembers the misfortune of running Windows Vista, Mr. Gates can expect enduring praise for pouring money into humanitarian pursuits. Just as I took Frick’s collection for granted as a teenager, we may even forget that there were choices to be made about public health and public education, and that Mr. Gates had an outsized role in making them. When most of us donate from our small excess, we express a concern and entrust the money to those with expertise; when Gates donates, he sets the agenda.

Now a new generation may out-Gates Mr. Gates. In December 2015, Mark Zuckerberg, the chief executive officer of Facebook, announced plans to transfer nearly all his Facebook stock to a vehicle for unrelated activities. He chose to do this through a limited liability company rather than a foundation, forgoing even the tax code’s spacious definition of philanthropy. The intended targets for this wealth, as for the Gates fortune, are health and public education, although, like the Gateses, they have limited direct experience in either field. (Mr. Zuckerberg’s wife, Priscilla Chan, at least, received a medical degree in 2012; neither she nor Zuckerberg attended public high schools.) Mr. Zuckerberg has demonstrated expertise in turning surveillance of people’s interpersonal activities into a profitable revenue stream through micro-targeted advertising. But there is as yet little reason he and his wife should be entrusted with the sway over our systems of health and public education that they are in the process of claiming. If we are to go on tolerating the self-canonization and attempted do-gooding of wealthy donors, we should expect them to actually be engaged in donating—not in the buying of indulgences, not in a vast privatization scheme to replace what could be public decision-making. This is advocacy; advocacy is fine, but we should call it what it is. If philanthropy means love of others, it must prove itself by entrusting the material of that love to the intended recipients. To believe in the dignity of other human beings is to honor their capacity to choose.

If philanthropy means love of others, it must prove itself by entrusting the material of that love to the intended recipients.

Philanthropy, that is, should be regarded as a subdomain of democracy, not an exception to it. We live in a time when economic stagnation and an authoritarian mood have put political democracy on the run around the world. Yet we also have more ways of hearing each other’s voices and making decisions together than ever before. Philanthropy could be a means for diverse, creative, collaborative acts of democracy—just what we need to regain the capacity to trust ourselves again, to remember the essential dignity that is our birthright. But only if it is real philanthropy. Giving should mean really giving, or giving back.

Natural Law and the Tax Code

The latest edition of the Catechism of the Catholic Church contains, among its many now-peculiar-sounding phrases, a doctrine called the “universal destination of goods.” Says the catechism: “In the beginning God entrusted the earth and its resources to the common stewardship of mankind to take care of them, master them by labor, and enjoy their fruits. The goods of creation are destined for the whole human race.” To the eye of God, as among the earliest Christians in Acts, all things are common to all people. Nothing is mine or yours, but it is ours because we are part of the same divine communism.

There is, of course, a very big but.

The catechism goes on, “However, the earth is divided up among men to assure the security of their lives, endangered by poverty and threatened by violence.” Our flawed and fallen nature makes God’s communism impracticable. Therefore “the appropriation of property is legitimate for guaranteeing the freedom and dignity of persons and for helping each of them to meet his basic needs and the needs of those in his charge.”

So, there is a pass for possessions. Property of some kind is needed and useful. It can even be good, since it can be a means of serving others. The ample theory and practice of Catholic capitalism, from the Medicis to Domino’s Pizza, depends on this exception to the underlying, communist rule. But then there’s another but; the exception goes only so far.

“The ownership of any property makes its holder a steward of Providence,” says the catechism. Property is not fully ours; it must be stewarded, and taken care of, and shared. “The universal destination of goods remains primordial,” the catechism insists. Thomas Aquinas put the matter this way in the Summa Theologica: “Man ought to possess external things, not as his own, but as common, so that, to wit, he is ready to communicate them to others in their need.” We hold property, yes, but we should hold it as if it is not completely ours. We should dispense with it that way, too.

The tax code has a way of confounding useful distinctions, including among kinds of giving. U.S. law may give us the impression, for instance, that any contribution to a 501(c)(3) or similarly tax-exempt organization equals a gift. But many such gifts are simply acts of either obligation, preference or reciprocity—like tithing at one’s church, or supporting organizations that promote one’s social opinions, or underwriting a public radio station to which one listens. That is a normal part of being a good community member, and it’s praiseworthy, but it is not really giving. It is more a matter of responsibility than philanthropy. Actual philanthropy, the love of people, the stewarding of Providence—these expect a fuller kind of gift.

Such gifts can come in different forms. They might be in the form of sacrifice—giving what it seems one cannot afford, expecting no worldly reward. They might alternatively be a matter of forfeiting excess—the wealth beyond one’s own needs, which the world’s imperfect property arrangements have delivered into one’s hands. In either case the gift, once given, is no longer one’s own. It never really was.

Pope Francis has made a point of challenging the common habit of mind in contemporary philanthropy that second-guesses the person in need, that presumes to know better. Will the food-stamp recipient spend it on junk food? Will that man on the street use your dollar for drugs or alcohol or a doomed lottery ticket? Francis denies us these questions, together with their presumptions. He reminded an interviewer just before Lent this year that, for the homeless man, maybe “a glass of wine is his only happiness in life!”

Democracy can be a tool, or a family of tools, for achieving the humility that wealth can otherwise lift beyond reach.

Giving to those who ask, said Francis, “is always right.” Before trying to instruct the asker, the giver should listen and learn. “In the shoes of the other,” the pope added, “we learn to have a great capacity for understanding, for getting to know difficult situations.”

Catholic Relief Services has adopted a framework known as “integral human development” to guide its work of giving around the world, drawing on statements from Pope Paul VI and St. John Paul II. It is an attempt to give in a way that presumes the dignity and autonomy of the recipient, that seeks conditions under which people can become more fully themselves through choices and relationships. It is also an attempt to back away from the presumption that a philanthropist is typically entitled to: the presumption of knowing what other people need better than the people in need do.

Another framework for dispatching such presumptions is democracy. Democracy can be a tool, or a family of tools, for achieving the humility that wealth can otherwise lift beyond reach. We tend to think of democracy as the purview of government, but it can also be a means of real giving. It can be a vehicle of Providence.

Participatory budgets

Mr. Zuckerberg, in a lengthy manifesto he published last February on “Building Global Community,” turned to a sort of democracy out of necessity. He admitted that Facebook’s employees, whether in Silicon Valley or satellite offices around the world, cannot fully predict the cultural sensitivities and local anxieties of its nearly two billion users. Combined with artificial intelligence, the platform would be relying on a kind of “community governance,” he wrote, and said that users should expect to see experiments in “how collective decision-making might work at scale.”

The kind of governance Mr. Zuckerberg describes strikes me more like disguised focus groups than a truly accountable democracy; the company’s structure would remain chiefly accountable to profit-seeking investors. But his nod to collective, digital decision-making is instructive. Democracy often gets blamed for the bureaucratic outgrowths of government, so we forget its efficiencies; spreading decision-making processes widely across a large and diverse society is, in principle, a far better way to meet people’s needs than trying to anticipate them through central planning. To the degree that markets work, this is why. But the trick is choosing the right processes for the right situations.

We are living through what could be a renaissance in techniques for doing democracy—and, potentially, for doing philanthropy.

Mr. Zuckerberg comes by his techno-utopianist enthusiasm for the challenge honestly. Alongside the present authoritarian revival in global politics, we are living through what could be a renaissance in techniques for doing democracy—and, potentially, for doing philanthropy. There has never been less reason for tolerating feudal, unaccountable pretenders to generosity.

Private markets have generated a proliferation of decision-making software—from tools designed for running a private company’s board elections to project management platforms for teams scattered around the world. Some tools require more tech-savvy users than others, and they rely on varied means of encryption and authentication. Old-fashioned elections can be organized more cheaply and securely than ever.

But some of the most important experiments enable new forms of participation altogether. Liquid democracy, for instance, is a system used by some of the new internet-based political parties spreading across Europe and South America. One of the leading implementations, DemocracyOS, comes from Argentina; there, the candidates for a political party agreed to vote however the users of the DemocracyOS platform directed them.

It is a system of cascading proxies, a blend between direct democracy and deference to expertise. Rather than electing a representative to make every decision on my behalf for a fixed period of time, under liquid democracy I can decide on every proposal for myself. But in most cases I will have neither the time nor knowledge to do so. I can therefore designate a proxy to vote on health-related matters, and another to vote on education. Maybe those proxies choose other proxies in turn. I can change my proxy at any time or opt to vote for myself. I choose my own level of involvement and step back responsibly.

Loomio, developed by a worker-owned cooperative in New Zealand, has become a popular platform for discussion and decision-making for online groups. An allied project, Cobudget, enables groups to pool donations and allocate them collaboratively. More examples are emerging from the “blockchain” technology that underlies the Bitcoin digital currency—enabling secure, transparent governance without need for a certifying authority. But not all of these democratic developments depend on boutique software; to reach people most in need, they must not. Participatory budgeting, for instance, is a technique developed in Porto Alegre, Brazil, that has spread to U.S. cities like Chicago and New York. There, largely through in-person meetings, neighborhood residents work together to determine how funds should be spent in their communities.

Democratic tactics such as these might be aids in a kind of philanthropy that gives more than it directs, that entrusts gifts more fully to recipients. But they are just tactics. What matters most is how they are deployed. I conclude with three possible strategies for a more democratic philanthropy.

Giving directly

Maybe the most obvious thing to do when wealth accumulates excessively should be to return it, recycling it to those from whom it came. The John Lewis Partnership, for instance, is a large retail chain in Britain. When one of the founder’s sons took over, starting in 1929, he began transferring ownership of the company into a trust, which would become owned jointly by its employees. This was not an outright gift; the employees gradually paid the family back. But the choice ensured that, from there on out, the company’s profits would go toward the many who produced them, not just the founding family or outside investors. It prevented further excess accumulation.

Mark Zuckerberg might consider doing something similar. Rather than transferring his Facebook stock into his own pet projects, he could put it in a trust owned and governed by Facebook users—say, through some of those “community governance” mechanisms he wrote about. Then users could benefit from and help to steward the valuable, personal data they post and share. Mr. Zuckerberg himself might find his own skills put to better use that way. Instead of seeking to transform fields in which he has little expertise, he could help guide the user community to being effective stewards of the company he did so much to build.

Instead of seeking to transform fields in which he has little expertise, Mr. Zuckerberg could help guide the user community to being effective stewards of the company he did so much to build.

A vast number of businesses face impending transition as their Baby Boomer owners depart without succession plans. Some are large factories, others are small stores and offices. It is a historic opportunity to share that wealth, through forms of cooperative ownership, with the very workers and customers who make those businesses work. This is a kind of philanthropy that honors the human beings in an enterprise, the people who might otherwise take a back seat to the imperative of profits.

Cooperative conversion, however, is not an option for many who are in a position to give. A second kind of philanthropy more closely resembles the forms we are used to: delivering a set of resources to a community or cause.

When donors discern the need to direct funds toward some particular purpose, they can at least step aside after the gift has been made. Conventionally, philanthropic foundations remain, after the original donor’s death, under the control of family members or the donor’s stringent directives. Givers seem unable to allow themselves to fully give. We should expect better; even when the donor frames an original purpose, a more appropriate set of stakeholders can steer the gift afterward.

For instance, if a donor wants to set up a foundation for education in a given city, it could ensure that a significant portion of the decision-making process includes ordinary students and parents there. Rather than imposing elections, the foundation could assign rotating oversight positions through random sortition, just as juries are chosen. Or it could hold open meetings for a participatory budgeting process. If the recipients of the gift are more widespread, such as patients with a rare disease, online tools like liquid democracy or Cobudget may be more appropriate. One way or another, in order for a gift to be regarded as truly a gift, it should be given in a way that is accountable to its recipients, rather than as an imposition on them.

In order for a gift to be regarded as truly a gift, it should be given in a way that is accountable to its recipients, rather than as an imposition on them.

A third strategy for democratic philanthropy relinquishes donor control even further, and it is already starting to become popular: direct cash transfers. Just give people money and trust them to decide how best to use it.

GiveDirectly, a Silicon Valley darling, is a charity that uses mobile payment technology to deliver money into the accounts of poor people in Kenya and Uganda. The Taiwanese Buddhist charity Tzu Chi has also made lower-tech cash transfers integral to its disaster relief programs. This kind of giving includes no stipulation about how people use the money, but evidence appears to support positive outcomes; when people receive money with no strings attached, they tend to use it well. GiveDirectly has also become involved in research around universal basic income—a system by which every person (or adult) in a society would receive a livable income just for being alive. Advocates believe that, rather than disincentivizing work, a basic income would free people to make more valuable contributions to society than dead-end jobs by freeing time for education, family life and innovation. Some even contend that as more jobs become automated by technology, basic income could turn into a necessity.

Something like a basic income would require more resources than philanthropy is likely to provide (even though eight men now hold as much wealth as half the planetary population); full implementation needs public policy. But some philanthropists—including Facebook’s co-founder, Chris Hughes, now co-chair of the Economic Security Project—are putting the idea in motion by funding local experiments in cash distributions that could later lead to policy shifts. It is hard to imagine a way of giving more in tune with the universal destination of goods than this—recycling wealth among as many people as possible, with no stipulations whatsoever about how they use it.

These proposals, I realize, run the risk of inhibiting the philanthropic supply. If philanthropy cannot be a means of buying glory and immortality, one might ask, who would do it? Useful things have been done in the world by well-meaning but self-serving philanthropy. Are we ready to lose that by raising expectations?

Michael Edwards, a former Ford Foundation grantmaker, contends that the current system is not worth protecting. “Philanthropy is supposed to be private funding for the public good,” he has written, “but increasingly it’s become a playground for private interests.” However much the Zuckerbergs and the Gateses of the world succeed in their mighty ambitions, their chief achievement will be the cultivation of dependence on people like them.

“The more you try to control social change,” Mr. Edwards warns, “the less you succeed.”

Providence might do better.

Photo by J.Gabás Esteban

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The “big problem,” it seems, “isn’t inequality —  it’s poverty.” Freund breaks the global list of billionaires down into two categories: “Those who inherited their wealth, and those who made it themselves.” In the latter category, she argues, company founders and executives like Bill Gates of Microsoft or Jack Ma of Alibaba “have helped create the most jobs and economic growth for those further down the income ladder.” The self-made billionaires who got rich from finance and real estate are more questionable, although some of them are innovators as well. Those in the “made” category who make money off privatization deals and natural resources are the least productive.

Today, Freund says, the majority of developing world billionaires are of the “made” kind, and of them company founders and executives are the single biggest segment.

First, I should give Freund credit for acknowledging the problematic nature of wealth acquired by natural resource extraction and crony capitalist privatization, both of which have close historical associations either with colonial conquest, robbery, enslavement and genocide, or  with neoliberal “Disaster Capitalism.”

So what are the problems? Just off the bat, distinguishing between billionaires located in the global North and South confuses the issue. It’s a global economy, and a major share of the wealth that made U.S., European or Japanese billionaires what they are was extracted by TNCs operating in the Third World.

Beyond that, Freund’s argument (at least as summarized by Swanson) is neither very original nor very significant. First of all, the argument that it’s not inequality that’s the problem, but absolute levels of poverty — and inequality does no harm so long as those at the bottom have a minimum acceptable standard of living and the wealthy didn’t get rich in a zero zum game — has long been  boilerplate at mainstream right-libertarian periodicals and think tanks and conservative institutions like Heritage and AEI. It’s the theme of about three hundred Thomas Sowell columns, for crying out loud.

Second, and more importantly, Freund seems to argue by definition. Made billionaires who are company founders or executives are entrepreneurs, and by definition therefore job and wealth creators.

But founding a company or managing one isn’t inherently productive — the majority of wealth going to company founders and executives arguably comes, not from their productive activity, but from the surrounding structure of privileges, monopolies, artificial property rights and artificial scarcities that enable the company to extract rents on the services they perform.

It’s helpful in this regard to look at what French liberal economist called “the unseen.” We see the companies, we see the services they perform, and we see the number of people they employ. But what’s the proper baseline to compare them to? Even when new companies are doing something useful and productive, that doesn’t tell us whether it’s the most efficient way of arriving at that good. What we don’t see is other, more efficient ways of providing the same good, that may have been crowded out by the companies we do see performing the function.

And in fact actually inventing or producing things is at best the path to small-time wealth. The really big fortunes — the billionaire kind — instead come from controlling the circumstances under which other people are allowed to produce things. Henry George Jr. called it getting rich by “controlling access to natural opportunities.” Thorstein Veblen called it “capitalized disserviceability” —  charging for the “productive service” of not obstructing production by others.

Microsoft is a classic illustration of this. Bill Gates didn’t get to be a billionaire because the Windows operating system has a nice user interface. He’s a billionaire because his copyrights and patents on the software prevent anyone else from copying it and selling it cheaper, or giving it away free. The overwhelming majority of Gates’ fortune comes from a state-enforced monopoly.

And Gates has tended to spend his personal fortune in ways that either directly profit him or promote his vision of the ideal world in which people like him can keep extracting billions. The Gates Foundation’s main “charitable” activities are all things like pushing proprietary GMO seeds and increasing corporate agribusiness’s control of the global food chain, giving away Microsoft software to the public schools (and thereby locking them into a legacy system whose upgrades won’t be free in the future), and lobbying behind closed doors to charterize public schools, insulate them from public control, and incorporate them into the supply chains serving corporate HR departments.

Alibaba isn’t as bad as Microsoft. It isn’t even as bad as Amazon:  rather than charging a commission on transactions made through its marketplace, it makes all its money off advertising. But it is a proprietary platform — something it has in common with all the other “New Economy” ventures like Uber, Lyft and AirBNB that have made people billionaires.

Such platforms basically preempt the venues for a particular type of cooperative behavior, and then rely on a combination of first-mover advantage, path dependency and “intellectual property” to crowd out other — and less socially pathological — ways of doing things.

As for manufacturing in the Third World, much of it is for the supply chains of global corporations like Nike and Apple that use “intellectual property” to retain a monopoly on disposal of the product, so they can simultaneously pay the companies that produce them almost nothing and mark up the sales price thousands of percent in global retail chains.

So here “the unseen” is open-source software, sharing apps that are not only open-source and genuinely peer-to-peer but cooperatively controlled by providers and users rather than a corporation, and open-source garage micromanufacturing cooperatively controlled by its workers and producing affordable goods for the local market.

Finally, “wealth” and “jobs” are by no means self-evident goods. GDP simply measures the sum total of everything that anybody gets paid for. So the more inefficiently stuff is produced, the more it costs in labor and material inputs to produce it, the more quickly it has to be replaced because of planned obsolescence, the more costly it is to repair because of bad design and proprietary parts, and the higher the embedded monopoly rents in the price, the more it adds to GDP. And the more stuff people are forced to do in the cash nexus, that they were previously able to do for themselves through direct production for use or in the social economy without corporate intermediation, the higher GDP.

And if direct production for use or production in the social economy is replaced by working for wages to buy the same goods previously acquired outside the cash nexus — against the will of those subject to the change — then that “job” isn’t a good thing.

In the case of food alone, the mass enclosures of land and evictions of tens of millions of peasants who were previously feeding themselves off their own land, coupled with the influx of evicted peasants into the cities to work in sweatshops to earn the money to buy cash crops produced on the stolen land, has no doubt swelled both the amount of monetized GDP and the number of “jobs.” That’s not a good thing.

So in response to the claim that most billionaires are “made,” all I can say is: So was Don Corleone.

Photo by quinn.anya

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