Tuesday, December 19, 2006

How much should you give?

Ethicist Peter Singer has an interesting article in the New York Times magazine on charitable giving. It's largely a discussion of "how much should one give?" and makes the argument that it is perfectly defensible, on moral grounds, to tax the rich more heavily than the poor and to expect them to donate more.

I've been looking for an article like this for some time. I'm nearing 40, and my wife went back to work this year. So we're starting to hit that point in midlife where our discretionary income is high enough to make serious charitable giving a possibility. Up until now our monetary donations have been small and irregular -- several hundred dollars a year, generally. Most of our charity has been about deeds: donating blood, helping neighbors, sending our excess belongings to nonprofits rather than throwing them out or holding a garage sale.

But now we're starting to think about charity in a more organized way, and Singer's article offered some thought-provoking ways to think about it.

Some of his more interesting observations:

1. Of the top four charitable givers in United States history, three were/are atheists or agnostic: Bill Gates, Warren Buffett and Andrew Carnegie (John D. Rockefeller, the fourth member of the group, was a Baptist). Further, Buffett's charitable pledges -- about $37 billion -- more than double that of Carnegie and Rockefeller put together -- after accounting for inflation. Bill Gates' donations are nearly as large: about $30 billion.

That says nothing, of course, about whether believers or nonbelievers as a group are more generous. But it's food for thought, as well as demonstrating the scale of modern philanthropy.

2. A lot of people argue that the rich owe much of their wealth to the society that helps them create it, but I've never seen the argument laid out in detail. Singer does. He cites Nobel-winning economist Herbert Simon, who estimates that social capital -- the prevailing social, governmental and economic conditions -- accounts for about 90 percent of what people earn in wealthy societies like ours. "On moral grounds," Simon adds, "we could argue for a flat income tax of 90 percent." Simon notes that that would be economically disastrous, but there's nothing unethical with taxing more heavily those who can most afford to pay.

Warren Buffett explicitly agrees with that logic. "If you stick me down in the middle of Bangladesh or Peru,” he said, “you’ll find out how much this talent is going to produce in the wrong kind of soil.”

3. Further, the better off have an ethical obligation to help the poor, because part of our affluence comes at their expense. This according to Columbia University professor Thomas Pogge, who points to everything from trade barriers that protect rich-but-inefficient American farmers from poor-but-efficient African ones, to corporations that buy natural resources from any government willing to sell -- thus providing a market incentive for civil war and corruption that acts as a tax on the developing country's poor. So helping the poor is not charity; it is compensation for some heretofore externalized costs of our own actions.

4. While Americans as individuals are among the most generous in the world, our government aid is so paltry that when we add the two together we still come in well behind countries like Denmark, Sweden and the Netherlands, who give three or four times as much total foreign aid (expressed as a share of GDP) than we do.

5. If, Singer says, we define "charitable obligation" as "shoulder our fair share", what does that mean? Singer cites the UN Millenium Development Goals, which hopes, by 2015, to: halve the percentage of people living in extreme poverty; halve the percentage of people who suffer from hunger; halve the percentage of people without access to safe drinking water; provide a primary school education to all children; reduce child-mortality rates by two thirds; reduce maternal mortality by three-quarters; and reverse the spread of AIDS, malaria and other major diseases.

The estimated cost of reaching those goals is $121 billion in 2006, rising to $189 billion a year by 2015. Much of that is already pledged, leaving an annual shortfall of about $48 billion this year and $74 billion by 2015.

If the top 0.01% of U.S. taxpayers (14,400 of them, earning at least $5 million and an average of $12.8 million) gave away 33% of their annual income, they would suffer no hardship and generate $61 billion a year.

If the rest of the top 0.1% of taxpayers (130,000 of them, earning at least $1.1 million and an average of $2 million) gave away 25% of their income, they would suffer no hardship and generate another $65 billion.

Either group alone could fund the Millenium Goals shortfall entirely by themselves. Both groups together could fund the entire program without government help.

You can keep stepping down the income scale, with the top 0.5 percent donating 20% and raising $72 billion; the top 1 percent donating 15% and yielding $35 billion; or the top 10 percent donating 10% and raising $171 billion.

As Singer notes, the most remarkable thing about those numbers is that a scale of donations that is unlikely to impose hardship on anyone would yield an annual total of $404 billion -- from just 10 percent of American families.

Throw in other countries, and the world's wealthy could easily provide $808 billion annually for development aid -- a staggering and world-changing amount.

When the choice is portrayed thus -- buy a yacht, or save 1,000 children from death -- it's not really a defensible decision to buy the yacht; the trickle-down effects of yacht-buying fall far short of the direct effects of charity.

That does not mean the rich should don hairshirts. Singer's numbers leave the wealthy with plenty of money to buy the yacht, and he argues that it's perfectly fine that they do so -- provided they have met their ethical obligations first.

What does that mean for those of us closer to the bottom of the scale? Do what you can. As evangelist Dan Stratton said in the same issue, God's 10 percent (the traditional Christian tithe) should come off net income, not gross. "A tithe isn't supposed to bankrupt you," he explains.

I suggest charitable deeds when your net income is low, scaling up the monetary giving as your net income grows. My wife and I haven't yet figured out what percentage we're aiming for; we're still trying to establish what our true net income is, once we subtract child care and commuting expenses. I don't know if we'll give until it hurts, but Singer has motivated me to make sure we give something meaningful -- and keep giving for the rest of our lives.

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2 Comments:

Anonymous Scott Hughes said...

No one needs to feel obligated to give, but if they have had a good year financially then giving is a very nice thing to do. Plus, it can make the giver feel great. In fact, the happiness gained from giving can make it well worth the financial cost. Unfortunately, the hunger and poverty epidemics cannot be ended simply by throwing money and other resources at them. We also need to utilize wisdom, (non-governmental) organization, voluntary cooperation, and persistence.

Thanks,
Scott Hughes
http://millionsofmouths.com/blog/nfblog/
http://forums.millionsofmouths.com

12/20/2006 3:24 AM  
Blogger Sean Aqui said...

Scott: It's a fuzzy thing. I agree that nobody should feel coerced to give; at the same time, I don't think there's anything wrong with trying to set a societal expectation for giving that supports more giving instead of less. Or pointing out the gap between our resources and our actions.

Making sure the aid is used effectively is an important part of the equation. To me, charity involves supporting those organizations that provide the wisdom, persistence, expertise and the like -- be it through writing a check or by actively participating in the work on the ground.

12/22/2006 10:52 AM  

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