Sunday, July 28, 2013

Peter Buffett's Very Public Takedown of His Father, Warren

Maybe the Howard Buffett genes have not died, afterall.

Warren Buffett during his career has taken a detour away from his father's libertarian/old right views and gone crony leftist. Now, Warren's son, Peter, has taken to NYT to call out the "charitable-industrial complex" that his father has been supporting. Pete correctly calls it “conscience laundering” and goes on to point out that it is ineffective in achieving its goals. Peter writes:
Early on in our philanthropic journey, my wife and I became aware of something I started to call Philanthropic Colonialism. I noticed that a donor had the urge to “save the day” in some fashion. People (including me) who had very little knowledge of a particular place would think that they could solve a local problem. Whether it involved farming methods, education practices, job training or business development, over and over I would hear people discuss transplanting what worked in one setting directly into another with little regard for culture, geography or societal norms.

Often the results of our decisions had unintended consequences; distributing condoms to stop the spread of AIDS in a brothel area ended up creating a higher price for unprotected sex.

But now I think something even more damaging is going on.

Because of who my father is, I’ve been able to occupy some seats I never expected to sit in. Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left. There are plenty of statistics that tell us that inequality is continually rising. At the same time, according to the Urban Institute, the nonprofit sector has been steadily growing. Between 2001 and 2011, the number of nonprofits increased 25 percent. Their growth rate now exceeds that of both the business and government sectors. It’s a massive business, with approximately $316 billion given away in 2012 in the United States alone and more than 9.4 million employed.

Philanthropy has become the “it” vehicle to level the playing field and has generated a growing number of gatherings, workshops and affinity groups.

As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.

But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.

Peter then goes on and gets a bit anti-market:
Often I hear people say, “if only they had what we have” (clean water, access to health products and free markets, better education, safer living conditions). Yes, these are all important. But no “charitable” (I hate that word) intervention can solve any of these issues. It can only kick the can down the road.[...] Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market. Is progress really Wi-Fi on every street corner? No. It’s when no 13-year-old girl on the planet gets sold for sex. But as long as most folks are patting themselves on the back for charitable acts, we’ve got a perpetual poverty machine.

It’s an old story; we really need a new one.
In other words, Peter sees the problem, but doesn't see the solution. He doesn't get how free markets and capital investment are the key to improving people's living standards.

The economist F.A.Harper understood clearly Peter's concerns about charity. Harper wrote:
 People spend vast sums trying to do good with economic alms in forms which, to me, seem open to serious question. In their haste to do good and to bask in the glow of immediate glory as purveyors of alms, they are being exceedingly wasteful of the means of benevolence. The methods they use would come to appear unbenevolent, I believe, if they would view them by the test of alternatives in the longer perspective of economic science.
But Harper also understood the solution:
A certain Talmudical philosopher once offered us this apothegm:

The noblest charity is to prevent a man from accepting charity, and the best alms are to show and enable a man to dispense with alms.

A profound observation! It deserves to be kept in mind constantly as we fumble along in attempts to do good to others.

The greatest charity of all, in the light of this apothegm, would be to assist a person toward becoming wholly self-reliant within nature's limitations, and therefore totally free. The nonmaterial, noneconomic things of the mind and spirit are supreme to this end and therefore comprise the greatest charity.[...]

The social fashion of our age is the attempt to do good to others in a confused profusion of economic transfusions. Other times have been less afflicted in this respect for the simple reason that they could not afford as much waste as we can. For them, sheer survival of self and family absorbed nearly all their effort.

The charitable endeavors characteristic of our time are, in my opinion, often futile for their intended purpose. In fact, they may even be harmful to the recipient by making him less self-reliant than before. According to the Talmudical definition of the noblest charity, whatever reduces self-reliance is negative charity.

I believe there is another use for this vast amount of time and energy that would support a positive charity, fruitful beyond the fondest dreams of most persons. The prevailing notion is that such a use is wholly selfish.[...]A large part of the high level of economic living we now enjoy in the United States arises from the use of tools.

The average person in the United States has available for consumption upwards of ten times that of persons in the less prosperous half of the world. The reason for their poverty is a lack of savings invested in tools of production. In all their history over the ages they have accumulated little beyond the most primitive and simple tools, such as crude plows and hoes.

Harder work by us is not the reason why we can enjoy ten times as much economic welfare as they do. Persons in the United States work no harder, if as hard, as do the poorer half of the world's population. Even including mental work along with sheer muscular effort, both of which contribute to output, I doubt if we work any harder — overall.

Nor does innate intelligence seem to explain the difference. We probably have no more geniuses per thousand population than they do.

Lacking any of our accumulation of tools, our output per worker probably would be even lower than that of the poorer half of the world at the present time; even their production is aided considerably by their simple tools. Comparison of their output with ours suggests that without any tools whatsoever our output would be reduced to perhaps one-twentieth of what it now is. To say it another way, perhaps 95 percent of our present output in the United States is made possible by the presence of our tools. These tools are available because in the past some wise people saved and invested in tools.[...]

I would certainly not scorn the giving of bread to a starving person in need. Nor would I scorn any other endeavors of a charitable nature by agencies which conduct recurrent campaigns for funds and materials for needy persons, so long as the offering is voluntary with one's own means. But I would emphasize strongly that the urgency of the plight of the needy can blind one to the possibilities of this greatest charity of all.

Those who benefit from the charity that flows from the creation of tools are the persons engaged in productive labor. This makes an excellent claim to worthiness, for as Samuel Johnson once said, "You are much surer that you are doing good when you pay money to those who work, as the recompense of their labor, than when you give money merely in charity."

I doubt Warren will ever understand any of this, but I think Peter has a chance.

1 comment:

  1. One of your best articles ever. And that's saying a lot. The greatest problem we face is the destruction of good work, useful employment, by all those willing to work.