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… but the greatest of these is charity!

March 15, 2010

A friend recently linked to a Doug Casey piece entitled, “Charity? Humbug!” It’s worth a read, if only to understand my vehement objections to its central thesis.

Doug Casey is world renowned as a free market economist, investor, and best-selling author. He describes the Bill and Melinda Gates Foundation and Warren Buffett’s donation to it as “harm done in the name of charity.” Labelling Buffett and Gates as “idiot savants” for giving their billions away, Casey enjoys the luxury of one sitting safely on the sidelines.

Keep your wealth, he argues, and leave it to your children. Let your money beget more money. This, according to Casey, is the greatest legacy of the very wealthy. Hold on to it, invest it, employ it. Gather more and more money to your own hoard. This is the greatest gift you can give to the world.

By your success, he poses, these resources are most efficiently allocated, and hence, maximize the benefit to all those touched by your wealth. Being the best at whatever it is you do, your wealth provides employment to those willing to work. This coalition of the willing deserves the scraps and crumbs that may fall from your tabletop. Those who cannot, “get out of bed” do not deserve your help. Tough noogies. That’s just life, so get used to it.

Casey summarily dismisses the Gates Foundation as doomed to be “blown on non-productive Band-Aids applied to people who will just get used to having Band-Aids provided for them.” Easy to say for someone on the sidelines, or rather, for someone who successively moves from country to country as newer more attractive tax regimes are identified. I’m sure this practice can be rationalized as Darwinian theory playing itself out in the purest form. Those who do not threaten my wealth deserve my company. Those who threaten my wealth should wither and die. Nice theory. Reality is something else.

Too bad the whole world can’t move to Argentina, eh? Of course, Casey would argue, it seems, that as more and more people move into attractive tax jurisdictions, the rest of the world will fall dutifully into line. Right… follow this reasoning to its natural conclusion and we’ll all be living in that libertarian delight of no government, no taxes, no roads or bridges, but rather fiefdoms ruled by those few very who engineer total and spectacular concentration of the world’s wealth. Gee, that sounds familiar. Not sure we want to go back there again.

Hospitals, he says, should all be privatized. He argues the same for libraries, universities, and research centers. By this logic, the same would apply to policing, firefighting, and national security. Government wastes resources at such a level that it should not exist. Leave to the free market all matters of communal interest. Regulations be damned. The free market knows what’s right. Leave it alone.

Been there. Done that, Doug. We’re now paying the price of the free market being given free reins. So far, I don’t see many benefits accruing to the folks on Main Street. No thanks, indeed.

The debate between government intervention in a command economy and a complete free market is one of continuum. Each of us resides somewhere on this continuum, few at either extreme, and most within some striking distance of the centre. One’s place of residence on this continuum depends largely on one’s particular loyalty to rights. At one end, the rights of the individual supersede those of the collective. At the other, the rights of the collective supersede those of the individual. It’s pretty clear at which end Mr. Casey resides. That’s his choice. At the same time, I take exception to his specious rationalization of this position by way of attacking those more charitable than he. I’m a selfish bastard and it works for me. By the way, other people benefit from the fruits of my selfishness so it must be the correct position to take. If only we had more selfish bastards, the efficient market principle would make this world a much better place.

A standard cheat in debating is to associate the opposing view with something roundly despised. Casey accomplishes this by describing the invasion of Iraq as a ‘charitable’ event. Well, if that’s charity, then charity must be a bad thing. Sorry. I’m not buying.

He argues: “Charity is done for the psychological and social benefit of the giver, far more than for the welfare of the recipient.” He may be correct in this. It’s hard to say. I guess it depends on both the motivations of the giver and the ultimate impact of the charity on the recipient. Many times, I’ve wondered on the notion of ‘selfish altruism’. Can we separate the gift from the donor? Perhaps not. Perhaps it’s only another matter of degrees. I’m a fan of measuring a man by his intent. In the end, however, we must measure charity by what is achieved.

I agree with Casey that governmental re-distribution of wealth often locks in welfare recipients “at the bottom of society”. This is absolutely true. Our government handouts too often make it unattractive for otherwise capable people to work. Moreover, these programs do create a multi-generational welfare class. I fully agree with him when he says this is “perverse and shameful.” This phenomenon, however, is not universal.

Where we part ways is in his description of the charitable donor as poorer as a result of making his gift, and of the recipient as necessarily “degraded by the receipt of an unearned, and likely undeserved, good.” I’m sure that many donors feel richer by far for having made their gifts. No doubt, many recipients of these gifts find themselves raised up, not degraded.

With only privatized universities, not one of my parents’ children would have graduated from the 500 square foot bungalow that housed eight people, one dog, one cat, the occasional rat and regular flooding due to poor drainage of the neighbouring creek. I would not have had the distinct pleasure of pursuing studies past high school… no wait! Would there be a high school in Mr. Casey’s model?

Without (God help us) socialized education, there’s not a chance in the world for me to be holding a degree in English Literature topped by an MBA. Come to think of it, even in our socialist Canada – whereas my tuition for the MBA (more than 25 years ago) was something in the range of a couple of thousand dollars per annum – nowadays, you have to be rich enough not to need an MBA to be able to afford one. Now that’s ironic! Without socialized education, I’d likely be still sucking up rubber dust in the tire repair factory. No… actually, I’d likely be dead from sucking up rubber dust in the tire repair factory.

My wife was raised in Kyrgyzstan, the poorest of the former Soviet republics, in a sod-brick house with no electricity and no running water. Without socialized education, she would not have attended university, and graduated summa cum laude, to become a successful university instructor in Moscow. (Nor would we have met. Best argument by far.)

I once heard the story of a Canadian woman who, as a single parent of two teenaged girls, by aid of government support, took night courses to finish high school, attained a B.Sc., gained entry to and completed medical school, and carried on through her year of internship and four years of residency to become an obstetrician/gynaecologist. Her story is by no means unique in Canada. Historically, our education system has enabled capable people to raise themselves up to a level where they can make a meaningful contribution to society. Doug Casey’s model would restrict such access only to the whims of the wealthy. The wealthy and their children are limited in what they can do for society. Genetic regression toward the mean, I’m afraid, leaves us in need of every bit of potential we can find. Often, this resides untapped in the lowest of socio-economic strata. What a waste! What a shame to conclude, as Casey does:

“In a rich country, why are poor people poor? Sometimes, it's true, bad luck can strike, and a person may need help. But that's what friends and neighbors are for. And if a person doesn't have any friends, and his neighbors won't help him, chances are he's not worthy of help. Over a lifetime, most people get what they deserve. The fact is that most people who experience perennial bad luck simply have bad habits. They drink too much, they don't care for themselves, they're ignorant, they're lazy, or they have other vices. In a free society, someone who's poor almost certainly deserves his fate. To hell with him.”

It’s difficult for me to imagine someone actually saying such a thing. I’m sorry, but I can find no better words than to describe this as ‘the arrogance of the unwilling.’

While I agree wholeheartedly with Casey that governments do an extremely poor job in the application of charity, I don’t find this to be a compelling argument by which to discard the concept of charity altogether. Dirty bath water does not guide us to throw out the baby. That the optimal model for charity may not yet have been discovered does not justify a dismissal of the concept. More work remains to be done. No doubt of it.

Casey reports that he does give to charity, “but strictly on a person-to-person basis.” How many people does he think Warren Buffett can touch on a ‘person-to-person basis’ with his $31 billion ‘misguided’ gift to the Gates Foundation? Just as Mr. Buffett and Mr. Gates have gathered enormous wealth by virtue of scale, they apparently feel that they can bring others into the world of the productive by virtue of scale. Note the distinction in my description of this charitable act. While Mr. Casey feels that their collective efforts do nothing more than feed fish to people who will come back next day for another serving, he would do well to better study the objects of his disdain. A primary focus of Bill Gates’ work is in the area of education. Education is an equalizer across society and around the world. It is also the great enabler in a global marketplace. Better education leads to participation by a broader group of both producers and consumers. Teach a man to fish and tomorrow he will open a seafood restaurant. What goes around comes around.

By Casey’s argument, however, I can only conclude that we should not expend so many resources in educating the masses. If we teach them how to read (as argued by the medieval church), they might start thinking for themselves. Better to keep them in their place of ignorance. Better to make more money for ourselves. Better to keep them employed. Better for everybody, non?

When I read Mr. Casey’s words, “… altruism means sacrificing your own values and welfare for those of someone else, which is always a bad idea…” and “… making a sacrifice should be morally repugnant to any self-respecting individual,” I can only reach for my neck brace from excessive head-shaking.

How he sees a gift to someone in need as a sacrifice of one’s own values I cannot understand. Is he so wrapped up in the ‘self’ that he cannot see the world around him? He argues mistakenly that, “Money… is evidence that its owner has created wealth… Making money and getting wealthy is therefore the greatest act of benevolence you can provide the world.” Such arrogance smacks only of rationalization and self-justification in a lack of charity. Money is not evidence of wealth creation. Money is evidence of wealth accumulation. Zero sum game at work in his model. That’s all there is to it.

Nations of people stricken with hunger, disease, and natural disaster, by his logic, deserve what they get. If I happen upon one or two, or maybe three individuals within those nations who warrant my support, they’ll have it. However, because I cannot trust the delivery of support in existing mass charitable institutions, these people will be better off if I just keep my money to myself. Eventually, I’ll be so rich that these people will all be employed by one of my enterprises. Everybody wins.

To my way of thinking, all of this boils down to how one finds meaning in life. Mr. Casey conveniently finds meaning in how much wealth he amasses for himself. In this accumulation of wealth is his embodiment of efficient market theory. On a superficial level, there is clearly some truth to this notion. Stepping back a few steps, however, the big picture tells an entirely different story. We do not live in a closed economy. The potential for greater total wealth should not be reflected in the number of plantations we own, but in the number of full partners at work in the global economy. The potential for efficient market theory is not defined in the accumulation of wealth by the few, but in the synergistic creation of wealth by the many.

This world will be a richer place, and each of us, in turn, wealthier players with an eye on the larger stage outside of ourselves. Happily, most people find life’s meaning in how they touch others. Mr. Casey is without a doubt a leader in his field. In circles of investment, I suspect he touches many hundreds of thousands of people on a daily basis. With his commentary on the folly of charitable giving, he has touched me.

I only wish I could be more charitable in reply.

With respect,

Kevin Graham

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