Thursday, June 25, 2015

The Capitalist as the Ultimate Philanthropist

By Andy Kessler

On June 11, the $11 billion Ford Foundation announced that it will pour its resources—about $500 million in giving a year—into fighting inequality. “We are talking about inequality in all its forms—in influence, access, agency, resources, and respect,” Darren Walker, the charity’s president, wrote in a letter.

Oh, the irony. I won’t join the public intellectuals having hissy fits over how people choose to give away their money, beyond being annoyed that since the Ford Foundation is tax-exempt, we’re all subsidizing it. Here’s the real problem: The foundation is getting exactly backward what its namesake, Henry Ford, understood. Society benefits from making, not giving.

The bulk of the Ford Foundation’s assets came when it received 88% of the nonvoting shares in the Ford Motor Company, most after Henry Ford died in 1947. Ford hated inheritance taxes, then a punitive 70%. In 1956 Ford Motor went public at $3.2 billion. Most of the shares sold were from the Ford Foundation, about a quarter of its holdings. The foundation’s charter stated the money should go “for scientific, educational and charitable purposes, all for the public welfare.” How times have changed.

This story matters because people have lost sight of where foundations got the money they’re donating. Ford Motor was worth $3 billion 60 years ago because it was profitable and investors had high expectations, not because the company raised wages to $5 an hour, a popular myth. Ford Motor was profitable because Henry Ford created scalable assembly lines, reduced the cost of the Model T to under $300, and sold 15 million of them.

Read the rest here.

1 comment:

  1. I generally agree with Kessler's article but would prefer the title be "Making not Giving is the Best Philanthropy". A dictionary definition of philanthropy is an "active effort to promote human welfare." Rather than focus on reminding people the source of the giving (which seems to beg for gratitude), focus on the fact that giving is often detrimental to human welfare and only making and trading in a free market is always beneficial to human welfare. Rather than feeding people for a day with charity try feeding them forever by building another company that creates jobs.