Why the super-rich really donate

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Philanthropy is about voluntarily doing good for other people. The respective actions always relate to a charitable purpose. Most of the time, very wealthy donors who give up considerable parts of their fortune out of their own convictions are called philanthropists. But are they doing justice to their titles? What are the real reasons behind the generous donations from the super rich?


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DANIEL ROLAND/AFP/Getty Images


The intentions behind philanthropic activities and donations are basically very noble. Extremely wealthy individuals who have built up large fortunes over the course of their lives are committed to using their financial resources for charitable and selfless purposes. As a rule, it is about the privileged wanting to give something back to society in order to do something good for the common good. All in all, identified grievances are to be corrected and the world to be transformed into a better place. Be it through the redistribution of wealth from rich to poor, the promotion of education and research or the protection of the environment. So at first glance, philanthropy is a wonderful thing without objection.

But on closer inspection it becomes apparent that modern philanthropy does not work quite as it should. Although there is a real trend towards donation among the wealthy today, wealth inequality remains high in many countries. A redistribution of the funds will therefore probably not take place. In addition, despite their large donations, the generous donors are apparently getting wealthier instead of poorer. One possible reason for this could be that in addition to the sheer help and selflessness of the benefactors, other interests drive the super-rich to philanthropy.

A better image

Donations can be very effective in the public eye and improve the reputation and standing of the donor. If you stand up for your fellow human beings and support charitable projects, this has a positive effect on your own image. For example, The Nation magazine explains that his philanthropy turned Bill Gates from “one of the cutest CEOs into one of the most admired people in the world.” His rather aggressive management style brought Microsoft multiple court hearings and heavy fines for monopoly business practices. However, as the Business Insider website describes, the “washing clean” aspect applies to countless philanthropists. While grievances persist in their own corporations, the wealthy owners are philanthropically active in other areas instead of ensuring better working conditions for themselves. Business Insider cites the technology giant as an example Apple that some of his products are manufactured in China under such drastic circumstances that workers there would apparently regularly commit suicide. Almost half of the portfolio of Giving Pledge founder Warren Buffett’s portfolio would consist of Apple shares, which would at least make him profit from the questionable type of production and would therefore also be responsible for it. So the question arises to what extent philanthropists want to buy their business dealings and improve their reputations.

Donate to the elite themselves

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Not all donations flow top-down in society. The Guardian writes in an article that only about a fifth of donations go to poor people in the US. Instead, a lot of money goes to art funding, various sports teams and other cultural matters, education and health care. A voluntary redistribution of wealth to the needy does not therefore take place in full. In addition, the super-rich are extremely happy to donate money in areas that benefit them themselves. According to the Guardian, the bulk of education donations in 2019 came from donations to elite universities and private schools where the benefactors studied themselves. The wealthy donors therefore primarily support schools that they or their children attended. A cycle can be seen in which the donations from the rich benefit the elites again. The top universities have produced the wealthy upper class and are again supported by them. According to the Guardian, the philanthropists are not so much helping to make the world a better place, but rather promoting the continuation of the well-known system. The super-rich donate for their own benefit.

Save taxes through donations

The more money you have, the more important tax savings become. In many countries, charitable donations are entirely tax-exempt or at least relieved. For many super-rich, the question arises as to whether they should bear the entire tax burden or rather be charitable in foundations. In this case, donations are an advantageous opportunity to not only have to pay less money to the state, but also to be able to influence certain matters and use the financial means to make a difference. Instead of simply letting the capital flow away without benefit, it is better to give it to the former university or other institutions. An example from The Nation shows that this can create real win-win situations.

In 2014, the Bill and Melinda Gates Foundation made a donation to one of the company’s corporations MasterCard $ 19 million to increase the use of digital finance by poor adults in Kenya. According to The Nation, the Foundation thereby supported MasterCard in its already existing business drive to attract additional clients in developing countries. The donation associated with tax savings thus helped the company to further expand its activities. However, the donation also had a beneficial effect on the foundation. The assets of the Bill and Melinda Gates Foundation are largely based on equity ownership Berkshire Hathaway influenced. Berkshire Hathaway was again involved in MasterCard at this point, which also had a positive impact on the foundation’s success.

Philanthropists take over the role of the state

According to Business Insider, the tax breaks for donors also have the effect that super-rich philanthropists are increasingly replacing the state in promoting charitable causes. The state lacks the money that the benefactors receive in taxes as revenue. The reduced financial resources leave a hole that widens with the monetary increase in philanthropy. The missing capital on the side of the state can no longer be invested in charity in the areas of education, health care or social affairs. Conversely, foundations with their very wealthy sponsors are increasingly taking this place. As a result, the state decides less and less where urgently needed funds go. Wealthy private individuals thus have the power to direct public attention to a certain extent and to influence current developments. Since all these processes are based on the subjective decisions of the privileged donors, according to the Guardian, modern philanthropy is under criticism for being undemocratic. After all, the distribution of the funds does not always match the intentions of a democratically elected government. Although the donated assets would entirely belong to the wealthy donors, given the tax savings, the state could still be given a certain say. However, this is currently not the case. One reason for the super-rich to donate is therefore the possibility of great individual influence.

Help the world

Despite the previously rather critical image of philanthropy, a number of donations have already done good for humanity in the past. According to the Guardian, donations from the Bill and Melinda Gates Foundation have nearly doubled global spending on malaria and polio research. With this support, the global cases of polio were reduced by approx. 99.9 percent and the disease was practically eradicated. In total, the Bill and Melinda Gates Foundation is said to have donated more than $ 45 billion and saved millions of lives since its inception. Finally, Aid for the World is another reason for the super-rich to donate. Finanzen.net editors

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