The conclusion of the article presents a false choice, and is flabbergastingly short-sighted:
"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."
First, wifi on every corner is progress. Second, you might need wifi on every corner to prevent the sex slavery. Third, even if you don't need the wifi, you can have both the arguable utility of wifi for the poor, and stop the sex slavery.
I don't understand how anyone can fail to see the spread of the internet as a big step in the spread of knowledge, fail to marvel at our modern day printing press and all the good it has done. "Internet everywhere" seems like a pretty good philanthropic strategy to me.
I had the same first reaction to the juxtaposition, but came to the conclusion that really what it does is call out another implied assertion that is nonsense.
A world with wifi on every corner could still have child sex slavery, and it shouldn't be difficult to imagine how or why. Yet, it is a common undercurrent, not always explicitly stated in the many corners of the nonprofit world, that there could be other explanations than social problems at the heart of these problems.
It is important to recognize that disastrous social problems are possible even with better technology. Furthermore, though technology may aid in solutions, it is pretty extreme to say that wifi might be needed on every corner, even with that qualifier.
What really helps people achieve some sort of self-actualization? Being well-nourished, educated, and having some form of control over their own destinies, are pretty good measures for me. I think that technology and economic progress has made it so that probably a couple billion people have a successful life under those criteria than in the past, yet for thousands of years there have been some people who lead fulfilling and successful lives without today's technology, and who had better lives than people who have any access to any technology right now.
There is a subtle distinction between providing for shortcomings and the long term goals of addressing the root problems, and it has been the source of countless public policy mistakes. Perhaps one of the most obvious is public housing, where it seems obvious that people who are struggling to afford housing or homeless would be better off if that were no longer a concern.
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.
Perhaps the other examples are a bit hazy, but charity can and often does provide access to clean water (by sponsored filtration programs, well digging etc). I don't understand what he means by this "can only kick the can down the road".
It means that charity can only provide a temporary fix. The countries receiving aid need to sort these issues out themselves or they'll return as problems when the aid is gone.
Part of the problem is that "when the aid is gone", for some countries, is not an issue; for them, aid will never go away, at least not in the timeframe of a political career.
It is hard for parents to let their children go find out their place in the world, especially if they are ill equipped. The same happens with aid organizations and countries.
Clean water is often harder to provide. People that lack clean water usually don't have any use for wifi; if they had enough money for a wifi-enabled gadget, they'd probably spend it on clean water provisioning or other life-support needs. So they are a bad market for wifi deployments.
From business point of view, "well-off people everywhere" is very desirable, since poor people are poor customers. Unfortunately, this problem is not readily solved by pouring in some modest money.
Imagine donating to North Korea; probably the money will mostly end up in military programs, even if some of the money will actually feed the undernourished. But political influence is usually a big no-no.
> People that lack clean water usually don't have any use for wifi; if they had enough money for a wifi-enabled gadget, they'd probably spend it on clean water provisioning or other life-support needs.
This is just empirically false. Esther Duflo teaches in her edx.org course on poverty, in one of the very first classes:
"The first surprising finding: television is more important than food."
Across geographies and cultures, poor people choose time and again to spend money on communication (as in tv and telephones) over nutrition. President of Bolivia Evo Morales, in an interview with Democracy Now, said in no uncertain terms: "Communication is a human right."[1]
the first thing I thought about is paying my taxes in the US:
most of my money will end up in military programs [0], but I do have the option to opt a percentage of my money out of those military programs by donating to charity -- a tax break.
I agree, clean water should be a top priority, whether it's cleaning oil spills, rain water, pollution, or drinking water, whatever...
another controversial point of philanthropy: is it better to fund a program to solve an existing problem using money, or to instead invest that money instead into education? I just don't know...
[0] looking up military spending, I found multiple results. some sites claiming as low as 19% of income tax goes to military spending, and others claiming much higher numbers.. ~45% (https://www.warresisters.org/content/how-pie-chart-figures-w...) -- without a doubt though, and according to wikipedia, the USA definitely tops the charts by a long shot. it also appears (acc to wikipedia) that south korea spends more than it's northern counterpart (http://en.wikipedia.org/wiki/List_of_countries_by_military_e...) on military programs
The difference in the quoted percentages is usually due to whether or not social security and medicare taxes and spending are included. If you include them, it is about 19 percent. If not, 45 percent sounds about right.
One thing I've learned from many so-called "philanthropists" is that hosting charity events can be a great status and money making/saving opportunity for those in the business of it. If you've ever watched a "real housewive of ..." episode, those wacky ladies are constantly hosting charity events and provide a pretty good example of how this works:
1) Get a really good tax accountant and lawyer.
2) Establish a charity (in the U.S. they're called 501(c)(3) organizations and have various laws about how they operate. Dedicate it to "Cancer Research" or "Helping Orphans" or whatever.
3) Set yourself up as the head of the charity, give yourself a respectable, but not over the top salary. This is the "organizational overhead" you often hear about.
4) Recruit a bunch of free volunteers concerned about your cause and host a charity event. Well done theme parties can bring in the most money. Include a donation envelope in case people can't come but still want to "support your cause".
5) Collect money. Make sure you remind everybody that their charitable donations are tax deductions! This will keep them coming. Guilt your friends into coming as well. If you get popular in the charity circuit you can even start charging a "cover charge for the even expenses, recommended donation is...$xxx" or "$xxx per plate" if it's a dinner.
6) Subtract misc expenses for room rental, supplies, cheap gifts for volunteers etc.
7) Take the donated money, subtract a percentage for "organizational overhead"
8) Donate the remainder to your cause or if you have time, spend the money on "donation events" where you get press for doing some kind of community service (advertising).
9) Get your charity to spend money on office equipment, cars, travel expenses etc. Deduct as business expenses.
10) Any left over money is a bonus to you for a job well done (can't show a profit!)
11) rinse and repeat
There actually are good charities out there that do good work, but separating them from this kind of self-service is hard to do.
Another thing to consider is that just because an org is a non profit, does not mean the people working there are making social worker salaries. One of my aunts makes over $400K/yr as an administrator at a non profit, and she's still technically on the bottom half of the management totem pole.
That page, while refuting the specific claims of a few old chain letters, actually seems to support the parent's assertion that the executives of some charitable organisations get paid fairly well (several over $500k). Then again, I'm not sure what people expect--it is presumably difficult to retain the sort of people required to manage very large organisations without paying them something in the ballpark of what they could get at a for-profit.
The salaries can also be explained by the lack of active "shareholders" to keep the self-interest of management in check. If you can't find competent managers for less than $400k a year you need to get out more. Charitynavigator.org breaks down the admin costs etc of most charities. I wouldn't consider donating to one that devoted less than 85% to actual program expenses.
It's a very interesting paywall, too. It continues to block me even if I clear all my local state (cookies and localstorage), turn on private browsing, and disable Javascript. But it does NOT block me if I use a different browser. I can't figure out how it works. Anyone here have a clue?
Which private browsing are you using? Some (such as Chrome's 'incognito' mode) share cookies among all incognito windows until the last is closed. So I was baffled when my fresh 'incognito' window was sending cookies on a 1st request somewhere... until I found the older window I'd forgotten about.
> There actually are good charities out there that do good work, but separating them from this kind of self-service is hard to do
No it's not.
Charities have to report how much money they spend on things like overhead, and sites like Charity Navigator can be used to quickly and easily locate this information.
> Charities have to report how much money they spend on things like overhead, and sites like Charity Navigator can be used to quickly and easily locate this information.
Reporting many expenses as either "Programs" vs. "Overhead" is subjective; guess which way most charities lean?
I know this because I've been building a product for one of the most knowledgeable charitable tax lawyers in this space over the last five years, and have gone over many charity tax returns in that time (called T3010 forms in Canada).
So I checked a dozen or so local charities I know of, some with reputations I don't know and some with, not a single one I checked was on the site. It appears to be absolutely useless and totally doesn't help at all with what I was talking about.
Efficiency and overhead aren't good measures of a charity's effectiveness.
Trying to evaluate the success and impact of a program is very important, for instance. But many charity's don't do it, because it adds "overhead" costs when you could be using that money to inflate a meaningless metric that looks good to donors who like to think of themselves as savvy.
Agree. And typically programs to educate the public about the issue and programs you are raising money for are counted as "overhead" even though in many cases they are just as important as the programs themselves. For example, educating people about world hunger is as important as sending food overseas.
> It’s time for a new operating system. Not a 2.0 or a
> 3.0, but something built from the ground up. New code.
The author's metaphor here assumes a world where a massively complex system, which is basically working but has some problems, can be "fixed" via replacement by a new system designed from scratch.
In all of human history, how many times has this ever actually worked?
Continuing the comparison to operating systems, the three most popular OSes of today (Windows, Mac OS, Linux[1]) are built on foundations dating back to the dawn of microcomputers. The intervening forty-odd years have seen hundreds of competitors invented and abandoned, while the last scion of CP/M holds its ground and the descendants of UNIX consume the world.
Or going back to the world of international politics, what is the half-life of a newly established form of government? All of our philosophy, reason, war, and technological advancement have brought us nothing but small improvements to systems of democracy founded thousands of years ago in Greece and Rome.
The NSA scandal and ongoing derailment of the Arab Spring show that we still don't know how to even control our own governments, much less design sweeping improvements to them.
[1] I'm counting Android as Linux despite not being GNU/Linux, because it runs the Linux kernel.
---
On the topic of charity:
One might think of charity as a medication, given to a sick society. It is effective in some cases, ineffective in others, and sometimes outright harmful[2]. Objecting to charity in general is equivalent to advocating against antibiotics.
Charity can't solve massive structural problems in a society, but when properly focused it can do things that malfunctioning governments aren't capable of. Just giving twenty dollars to everyone in Pakistan will make their own lives temporarily better, but spending twenty dollars per capita on Polio eradication will improve the lives of their children, and grandchildren, and so on until the end of time.
[2] See: the near-annihilation of Africa's textile industry due to donations of second-hand clothing.
> The author's metaphor here assumes a world where a massively complex system, which is basically working but has some problems, can be "fixed" via replacement by a new system designed from scratch.
> In all of human history, how many times has this ever actually worked?
I think the most recent serious attempt at this was Cambodia under the Khmer Rouge. I think that states it all.
It's not that all our advancements have brought us only small improvements over ancient Greek democracy. It's that most advancements over ancient Greek democracy haven't even been tried at the national level due to constitutional conservatism.
How can you say that? So many different systems of government have been tried in the last 2000 years, and the only ones that have lasted long term (> 200 years) seem to be democracy and feudal systems.
I meant that the space of possible democracies is very large compared to the very, very small space of democratic systems anyone has actually attempted to use.
Were the wealthy truly interested in promoting greater social good, they would put their efforts into reforming tax systems and global finance in order to help make the world more fair and just.
Replacing income taxation with wealth taxation (plus a value-added tax), e.g., could simplify and make far more equitable the system we operate within, while greatly improving incentives and aligning them with our society's openly professed values. For some reason, there are surprisingly few think tanks and lobbying groups advocating for such a change.
[Edit: I'm kind of amazed to see this getting down-voted. I would love to hear from those who think this comment isn't helpful.]
the a priori assumption here is that the government is 'better' than private interests in deciding how charitable funds should be spent. Why do you think that these newfound revenues coming into the treasuries of the state will be subjected to good stewardship? The government is liable to be using those funds to fight unjust wars, subject innocent people to draconic and unjust policies with escalating costs (like the drugs wars), and so on and so forth.
And there are plenty plenty plenty of corrupt businessmen, but it's way worse in government. right now there is a controversy going on in the central basin municipal water district in california, where overbilling contractors (and kickbacks) happened, the son of an LA councilman was 'hired' as the director, paid six figures to do nothing, and had benefits such as a retirement plan and paid tuition for an expensive private undergraduate degree. How do you get away with that? Almost every director of a nonprofit charity knows that there are rules upon rules prohibiting conflicts of interest that you have to bend over backwards making sure you don't violate in case the IRS comes after you.
since when does the amount of spending have anything to do with its effectiveness? And anyways, by what criterion is the OECD judging what constitutes "social spending"? Finally, the child poverty rates in that graph is a really fine comparison. The US has a lower child poverty rate than australia or japan, which would have been surprising to me. I'm not terribly embarassed by living in a country whose child poverty rate is equivalent to New Zealand's.
I'm not sure what graph you are looking at, according to Chart CO2.2.A there are only five countries with higher child poverty rates: Chile, Turkey, Romania, Mexico and Israel.
Some of that surprised me as well. But... these sorts of micro-rankings of countries that all have similar "operating systems" are not very useful. The real lesson here is that OECD countries which by and large practice liberal democracy and free markets are tightly clustered on most quality of life measurements, while countries that don't tend to cluster lower down. This is true of countries with vastly different cultural legacies, and even countries like Japan that has liberal demoracy successfully forced on them at gun point.
It makes you wonder just what Buffet thinks he's talking about. I doubt he knows.
The a priori assumption here is that the government is 'better' than private interests in deciding how charitable funds should be spent.
Better at fulfilling the democratically mandated will of the people, yes. A given government can be (and often is) corrupt, but if you don't trust in the principles of democracy, what you are really saying is that you don't trust people to know what's best for themselves on any collective level.
Which is a dangerous assumption, because it indicates that you don't really believe in freedom for other people, but instead in (what's the phrase? ahhhh...) world optimization.
Doesn't a wealth tax encourage immediate consumption? And how do you measure wealth? Would the government hire thousands of wealth assessers to value old houses and cars and furniture?
I've always thought that economists consider a consumption tax the ideal tax.
For a wealth tax on smallish amounts of wealth, I agree those are problems. But a wealth tax is usually contemplated as being on large fortunes. That removes the need to worry about the valuations of small stuff. And it also makes encouraging spending rather than accumulation a feature rather than a bug: one purpose of a wealth tax on large fortunes is to prevent large fortunes from accumulating and being maintained indefinitely, i.e. to prevent the emergence of a kind of aristocracy.
Thomas Paine proposed an early version of a wealth tax for that reason. His version was something of a hybrid between an inheritance tax and a wealth tax: it was an annual assessment on the current value of inherited estates. That has some conceptual advantages: unlike a straight wealth tax it exempts self-made fortunes for the lifetime of their maker, and unlike a straight inheritance tax it doesn't happen all at once as a single lump sum (which can be problematic for inheritance of hard-to-divide things as well as easier to dodge with instruments like generation-skipping trust funds). But in a modern context it has some administrative disadvantages, because it requires long-term tracking which portion of one's net worth is inherited vs. not.
Lots of economists like wealth taxes, too, though talking about them to wealthy people often goes over poorly.
A wealth tax encourages putting assets to work rather than simply engaging in "wealth preservation". Replacing most tax revenue with a wealth tax + a VAT (a consumption tax) ensures that everyone contributes fairly, and offsets the "immediate consumption" incentives.
How does adding a VAT to a wealth tax offset the immediate consumption incentives? Either way, you are taxed when you spend the money. Additionally, if you don't consume immediately, you are taxed some more. Hence, immediate consumption incentives.
VAT rate is a tunable parameter in a tax system. It could, in principle, be set high enough to discourage all consumption (which would of course not be desirable). This implies that there is some rate that it could be set to that would offset any added consumption incentive caused by wealth taxation (assuming such an incentive exists, which I think might not actually be the case under most wealth tax schemes).
Indeed, whether there is an immediate consumption incentive or not depends on how good someone is at investing. If the person is able to generate a return far in excess of the periodic wealth tax, that person has no added incentive to spend whatsoever (spending would decrease future income and wealth). If the person isn't a particularly good investor, then spending becomes more attractive. Which seems to me exactly like the outcome we want.
Furthermore, a wealth tax tends to hit most those individuals who as a group already spend a much smaller proportion of their income (the highest earners tend to save the most). Indeed, since most middle- and low-income earners would only be taxed on their consumption, such a tax scheme would incentivize those with little to increase their rate of saving.
Without a VAT tax but with a wealth tax, $10 can buy 10 sandwiches today or 8 sandwiches in the future. If you add a VAT, $10 can buy 8 sandwiches today or 6.4 sandwiches in the future. Either way, better to consume today than tomorrow.
This applies to the wealthy and middle class alike.
A wealth tax discourages productive investments since it reduces all rates of return. In particular, it reduces marginal rates of return below zero, discouraging productive investments. Say I can buy 10 sandwiches today, or build a machine which will give me 11 sandwiches tomorrow. If your wealth tax is 20%, it's better for me to consume 10 sandwiches today than 8.8 sandwiches tomorrow.
Seriously, just crunch the numbers. It's not hard.
Perhaps something hasn't been made clear. I'm not sure why you seem to have adopted a condescending tone.
A wealth tax is typically a periodic (monthly/quarterly/yearly) tax on total net worth. This tax often ranges between 0 and 3% yearly, often with with highest rates only applying to wealth above a certain amount.
What I think might have been left out from your example is the fact that the person isn't choosing just between spending and not spending. They are choosing between spending and saving/investing.
The arithmetic is simple. If I can generate a 7% return on my assets, and I'm being taxed yearly at 1% of my assets, then the way for me to make the most money is to have the most assets. The return I get yearly is 7% - 1% = 6%. If one year I have $120 and I spend $20 of it, then I make $6 that year. If don't spend any, I make $7.20 that year.
EDIT: Re "... discouraging productive investments". This statement might be true for capital gains taxation, but it isn't so for wealth taxation. If I invest extremely conservatively (e.g. in precious metals) then I might only manage a 3% return. A 1% wealth tax would then amount to a 33% capital gains tax. If I invest aggressively and successfully, then I might earn 10% that year. Then the 1% would be equivalent to only a 10% capital gains tax. As such, a wealth tax is the only tax that actually encourages productive investment and discourages hoarding.
An investment is socially useful if it has a positive rate of return, since it creates wealth. An investment will only be made if the investor can capture a positive rate of return.
If the rate of return is R and the wealth tax is T, then the investor can capture only R-T. Thus, productive investments for which 0 < R < T are not made.
Unless you want to assert that there are no investment opportunities in the world with 0 < R < T, the wealth tax clearly discourages some productive investments.
If this claim is true, it's highly non-obvious. For one, it seems you would need to conclude that inflation should also be zero (or negative!?) lest certain productive investments go unmade.
Sure, it may discourage some very low-yield productive investments. This is the cost of encouraging some more productive ones. At present, we live in a world where there's lots of wealth that's poorly (too conservatively) allocated. So such a trade-off seems entirely reasonable.
A wealth tax discourages all investment and savings. There is no trade-off here. The rate of return (and hence the incentive to save) is lowered on all investments.
Your analogy to inflation is nonsensical. Inflating away the value of cash does not reduce the incentive to invest in shares of GOOG or a pizza shop. Regardless of the inflation rate, the pizza shop will still produce the same # of pizzas one year from now.
This may be true of a wealth tax in the absence of a VAT. If you have any good sources on this, I'd be very curious to see them (though I'll look them up myself, too).
Regardless, too much consumption (and too little saving) has never been a problem for the group that would be subject to a wealth tax. By exempting the first $100k - $300k (or so) of wealth, most people would experience no such disincentive.
In any case, the larger point isn't whether or not it discourages investment. The real question is whether this kind of policy would be better or worse than what we've currently got. Capital gains taxes also discourage investment. Income taxes discourage work. Those impose real costs too. The claim I'm making is that any discouragement of investment or savings (among the already by-definition-wealthy) imposes far less of an economic cost than the current discouragements of by capital gains and income taxes.
There's a huge literature on optimal tax policies, usually focused on more specific questions, so I'm not aware of a good survey paper on what economists think of wealth taxes generally. However, two specific questions you could look into, each of which have significant supporters on both sides:
1. What are the relative merits of inheritance taxes and wealth taxes, from the perspective of economic efficiency and/or intergenerational egalitarianism?
2. What are the relative merits of wealth taxes vs. capital-gains taxes? Roughly, is it preferable to tax capital annually based on its current value, or to tax realized gains in capital at the time of realization?
The current real-world situation is that inheritance and capital-gains taxes are fairly common, while wealth taxes are uncommon, and there's some disagreement over whether that is the right choice.
It's getting downvoted because it's far too similar-sounding to the dreaded S word.
I think the reason the wealthy by and large won't "put their efforts into reforming tax systems and global finance in order to help make the world more fair and just" is precisely because they believe the world already is "fair and just." In a world where money is the single largest broadcaster of a whole slew of societal signals --your caste, your worth, your success, your legitimacy-- finding yourself with lots of money tends to reinforce the notion that you must be doing it right already. To the extent that there are problems in the world, it seems the wealthy feel almost universally as if their own resources and philosophies are best suited for remedying them, rather than governments or other collective structures or any contrasting philosophies. This precludes ever examining whether "tax systems and global finance" --or other attitudes and philosophies of the wealthy-- are the actual perpetrators of those problems. Peter Buffet argues that such philosophical transplantation is the cause of the problems the transplantation is trying to fix and that any sincere attempts to remedy society's ills must address it.
Honestly, I don't think the wealthy, on the whole, are really concerned about fairness and justice in any context that parts them from their wealth. If egalitarianism was the highest value and penultimate goal, then the concept of extracting surplus value from others' labour and keeping it for yourself would be thrown out entirely. Suggest that however, and you get thrown under the bus for being a pinko-commie-socialist-marxist-anarchist-class-warfaring-moocher-taker-leech.
To be clear, I'm not advocating egalitarianism, or contending that it's the highest value. The goal is to align policy with our most defensible values and ideals (hard work, fairness, merit, etc.).
If the wealthy truly believe we live in a meritocracy, in which the hardest working and most competent end up the most well off, then taxing wealth should be preferred to taxing capital gains. Any hard working and competent wealthy person should have little trouble earning returns on their personal capital that far exceed a ~1.5% annual wealth tax (over a multi-year time horizon). Only those who choose to do little with their wealth, or cannot manage it competently, end up worse off. But this accords well with "survival of the fittest", yet another value often espoused by the world's wealthiest.
In other words, the goal here isn't socialism, it's rationality.
Depends on your perspective. A consumption tax charges people in proportion to the benefit they receive from society. An income tax charges people in proportion to the value they create for society. A wealth tax charges people in proportion to how much they save for the future.
So the question is what do we want to discourage? Consumption, value creation or savings?
Savings, right, since we want rich people to spend money instead of hoarding it to drive the economy? Or value creation, since it causes economic inequalities? Or maybe even consumption, I guess, if you hate America and don't believe the amount of money we can borrow and spend by racking up a trade deficit is a good measure of economic health.
If there are specific policy goals that we'd like to accomplish, it's probably best to make a very simple taxation system (tax the total of everything, using the best appraisal tools we have), and then add specific provisions that address such goals directly. One simple approach to the retirement issue might be to have marginal wealth taxation rates (first $100k are exempt, e.g.), or have (as we do now) limited tax-protected retirement funds (EDIT: e.g., IRAs -- "accounts" might have been the better word).
that's cute, who would get the privilege to run those tax-protected retirement funds. What sort of investments would be permitted in these funds? Aren't these people, then, the benefits of largesse created as people flee the taxation?
Plenty of countries already have partly-tax-exempt retirement savings, to encourage people to lock money up for retirement instead of making equivalent instant access investments.
what are you allowed to put into an IRA, and those investment vehicles are the benefits of a privilege that no one else has. Could you use your IRA to invest in a person just released from prison, to give them job training, if he agrees to pay you a portion of his salary back? No. But you could use your IRA to invest in a fortune 500 company.
yup, also what would happen is the government would get bigger and bigger on these newfound taxation revenues. That's not great, but in the most idealistic situation, it's not necessarily bad. However, what is bad, is when the economy sags, the taxation revenues to sustain this bigger government will fall short, the government will go into debt, and do one of two things: It will either print money or borrow.
Borrowing (with interest) implicitly assumes the growth of a revenue stream. With private entities, the lender is on the hook if it goes bankrupt and can't fulfill its obligation. With public entities, the citizen is on the hook, so the only solution is to increase taxation down the pike, unless you have a miraculous recovery that restores the economy to what it was before (plus interest). If you don't think the wealthy will find a way to avoid this taxation down the pike that the middle class and poor will have a harder time leveraging, you are naive.
Printing money is worse. Because it devalues the currency, makes everything more expensive, and that $100,000 limit that you set as the point where the wealth tax kicks in becomes a lot more painful. Pretty soon, the poor are paying this tax that only the rich were supposed to pay. Over net time, the people that you are hurting the most are the poor, because the rich have long ago figured out how to avoid this tax.
Congratulations. Through your programme of good intentions to fix the divide between the rich and poor you have made the situation far worse than it ever was.
Money is debt. There has never been a world without public debt, because that debt has to come from somewhere. Usually, it comes from the government, and the rates of interest and repayment dictate growth or shrinkage of the money supply.
Contemporary money is certainly equivalent debt, but in the long run historically, debt has been private debt. Keeping in mind that for much of modern history, any form of lending was considered "usury" and generally relegated to corners of society.
There is a difference between money that is based on savings and money that is based on debt. Money that is based on savings is net, an exchange for services that have already been rendered. Money that is net based on debt is net, an exchange for services that are expected to be rendered. One of these paradigms is subject to painful corrections as a result of counterparty risk; the other paradigm treats unexpected failures as a sunk cost.
I think the issue goes deeper. Not enough people are willing to look at the root of the problem: the monopoly on the issuing of currency and credit in the US that is held by private interests. When private interests control the volume of currency, they control the material life of the country, including the government. The growing imbalance of wealth and income is a direct result of this cause.
Tax reform is a good idea but it's meaningless if it leaves the nations's ownership of currency and credit in private hands.
"Instrumentalities like the national banks or the federal reserve banks, in which there are private interests, are not departments of the government. They are private corporations in which the government has an interest."
Asking sincerely: How far do you think a few million dollars could go? What sort of research needs to be done (and would be convincing to lawmakers)? How would advocacy money be spent?
I think this is a steep challenge, even for a millionaire.
The first few million would need to be leveraged to gain the support of others with money and influence. Probably the first bunch would be spent meeting with lobbyists to hear what they propose.
I'm afraid I can't speak to the returns on lobbying dollars spent, but clearly money talks in this arena.
There are a variety of strategic and tactical moves that could be made. I'd be happy to share whatever ideas I have about them in direct communication (pseudonymous contact info is in my profile).
who gets to decide what is 'thoughtful and convincing'? How can I be that person, so that I can decide my friends and family are thoughtful and convincing?
Funding and founding organizations that can serve as counterweights to the ones advocating on behalf of the interests of the already powerful would be one way.
Though it took some decades, we have seen the results, in the public narrative and in policy, of the founding of the Heritage Foundation (1973), the Cato Institute (1974), and Americans for Tax Reform (1985).
In almost every discussion about charities and non-profits the main discussion seems to revolve around the money we donate and how efficiently charities use these donations. One thing that I find people forgetting is how valuable their time can be to non-profits and how that often is way more valuable than donations. Each one of you on HN certainly has a skill that would be valuable to charities (especially small ones) whether that be technical help or in taking your skills in finding customers for your startup and applying those skills to fundraising for the non-profits. You would be surprised at how limited many non-profits are in these areas and how even an hour here and there each month can make a huge impact.
I realize many of you just don't have the time and I am not suggesting this is for everyone. However, if you do, try sending a quick email to the director of a non-profit you find interesting and you might be surprised at how happy they are to hear from you.
The primary thing most nonprofits need is money. Here, I'll give you an example:
My mom ran a branch of Habitat for Humanity for a while. People universally loovvee Habitat. People were constantly volunteering, which is great! However, most of the time, there just is no work to be done by volunteers.
The primary thing Habitat needs is land and construction materials (which usually means: money).
People were sometimes upset about being turned away... but unless they could donate land, money, or construction supplies, there just wasn't much unmet need for general laborers.
I think you point a more systemic issue in the modern world. It isn't just in non-profits, there is a general lack of land, money, and construction supplies. First world infrastructure crumbles not due to a lack of unskilled labor to set to paving streets with vehicles, it is a lack of those vehicles for people to drive, and a lack of money to push politicians to allow it.
I'm not well versed at all in the problem, but I see it as a major one - there needs to be some major innovations in materials extraction and distribution to enable a next generation deployment of machinery to make the next round of renovation globally possible. And there is just no one picking up supply to meet that demand, mainly because while people want to fix all the broken infrastructure and build nations on new roads and proper housing, there is just no machinery to meet the demand, and no money to pay for it.
I can believe that's true for Habitat For Humanity, but not all charities have the same bottlenecks. My mom co-runs a branch of Meals on Wheels, and the main thing they're constantly short on is volunteers.
"Yes, people are sometimes limited in their ability to trade time for money (underemployed), so that it is better for them if they can directly donate that which they would usually trade for money. If the soup kitchen needed a lawyer, and the lawyer donated a large contiguous high-priority block of lawyering, then that sort of volunteering makes sense—that's the same specialized capability the lawyer ordinarily trades for money. But "volunteering" just one hour of legal work, constantly delayed, spread across three weeks in casual minutes between other jobs? This is not the way something gets done when anyone actually cares about it, or to state it near-equivalently, when money is involved."
I have a fair bit of domain experience, and I'm going to disagree with the other people who have responded to you and argue that volunteering time is often more helpful than donating money. The efficacy of time vs. money is context-dependent and one is not better than the other.
1) How much money are we talking here? An extra thousand dollars would be meaningful to a small organization, but $50 is not going to make a difference. Something like Habitat for Humanity has thousands of people donating $50, but small organizations don't, and are constrained by lack of man hours as opposed to money.
2) Not every organization worth helping is a non-profit. Local community groups are often not non-profits or any sort of official organization at all. Once again, just because Habitat for Humanity is inundated with volunteers doesn't mean your local group investigating police corruption is.
3) Many organizations don't know how to use volunteers. This is partially because volunteers are notoriously unreliable, but it's also because most groups don't have outlets for self-motivated volunteers. These volunteers have to "create a position" for themselves, and if they're motivated enough to help but not motivated to define their jobs then they'll just lose interest and drop out.
4) A lot of organizations are composed entirely of volunteers. They might need money for something like webhosting, but they probably also need people to perform basic tasks like research or website administration. Unless you are giving the group enough money to hire a full-time staff member or something similar, there are severe limits on the marginal utility of a dollar.
5) To reiterate, not every non-profit/organization is Habitat for Humanity. There are a lot of smaller ones that need help an do good work.
Instead of conditioning improvement in the developing world on the largesse of billionaires, we should identify the structural phenomenon that are retarding quality of life there and invent new solutions that target those phenomenon directly. Instead of buying condoms and bottled water for Haiti, we should fix Haiti's government and economy.
That was not my takeaway - it was more - we should give money to the people in Haiti who are asking for it, even if we don't fully understand or approve of the utility - presumably poor people.
There has been a lot of research in recent years suggesting that the most effective form of charity in many poor countries is to simply give people cash, but there has always been a negative reaction from this from some sections of the establishment who fear that giving cash to poor people will just cause it to be wasted. I think this stems from a residual Calvinist assumption that poor people are the architects of their own misfortune and therefore can't be relied on to use money appropriately.
I'd agree direct cash is underused. But, Buffett's call is for "trying out concepts that shatter current structures and systems that have turned much of the world into one vast market". That's both grander and vaguer than the simple (and market-reenforcing) direct cash approach.
Buffett is so vague that people are seeing in it whatever they want to see.
> Buffett is so vague that people are seeing in it whatever they want to see.
This is true. And anyway, here's a couple of things I see.
The first is a failed (or at least truncated) attempt at articulating the concept of Structural Violence[1]. I'm surprised he got so far as publishing this op-ed, without having been told to read anything by Paul Farmer. At least it appears he hasn't, even though Farmer is quite well-known. I know George Soros counts himself as a member of the Farmer school.
The second thing I see is Buffet slipping into the trap of armchair "big-picture" philosophizing. This is what Esther Duflo warned against in the very beginning of her poverty course on edx.org (she has also given a TED talk). Trying to make grand, blanket statements or generic judgements about aid as a whole, is a flawed exercise. Duflo holds up two books as the prime examples of this fallacy: The End of Poverty by Jeffrey Sachs, and White Man's Burden by Will Easterly.
Fixating on big-questions and big-answers clouds thinking and hampers action. Instead, Duflo teaches a clinical approach as infinitely more productive. Ask specific questions, conduct trials and collect data. Doing experiments and making observations is a much better way to discover truth than thinking your way through an extremely tangled web of armchair philosophizing.
I agree it's bad if the world depends on the largesse of its highest elites.
But we can turn the article's logic on us too. What if we US citizens bear some responsibility for Haiti's suffering, because our elites/government attack and overthrow every attempt they make to solve their own problems?
Fortunately, all we need is to accept the simplest moral "innovation". Get off their backs; and if we're particularly noble, pay reparations. (Just as we'd hope a future China did if they successfully dominated us and turned us into a basketcase.)
If anyone's understandably skeptical, simply look to opposition/dissident media. Because it's rational to seriously consider the possibility that an attacking country's media may be a component in those attacks. In the US, Democracy Now and Noam Chomsky are reasonable sources, which you can then fact-check to your heart's content.
> What if we US citizens bear some responsibility for Haiti's suffering
We do, I think. Write the history book of today that someone might read (probably through a brain interface) in a thousand years.
The story of the US isn't one to cast a positive light on. The 500 year legacy of imperialism is that empires conquered the world and intentionally kept vast swathes of it in perpetual turmoil for selfish goals.
Every time the US conquered a country, be it by proxy in Iran in the 70s or directly like in Iraq, the legacy will be the US getting in the way of the people of foreign countries dictating their own destinies. And that is something we need to hold ourselves accountable for.
Instead of buying condoms and bottled water for Haiti, we should fix Haiti's government and economy.
This sounds dangerously close to colonialism. Or nation building to use the more modern term, although the modern version of it is rarely ambitious enough to actually succeed.
(As an example of the distinction, compare the colonial British efforts to end widow burning, compared to contemporary American efforts to end honor killings.)
I think the author agrees with that concern, which is why he talks about needing a whole new "operating system" of approaches to actually accomplish this. Let's all just stipulate though that places like Haiti do in fact need fixing.
I'd rather be a resident of a British colony (particularly at their peak) than of most of the horribly self-governed countries in the world. Or French colony. But definitely not Portugese or Belgian colonies.
I think you've shifted his meaning a bunch with that summary. Peter Buffett doesn't mention Haiti specifically or make suggestions that casually translate to "fix [some country's] government and economy".
He's vague and impressionistic, and his most concrete suggestions (which aren't very concrete at all) are in the 2nd-to-last paragraph:
"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."
call me out if I'm wrong here, but he just had a bazillion news stories saying he was going to do philanthropy. how is that not back patting? finally, he concludes that we will have a perpetual poverty machine by people patting themselves on the back with charitable acts, so his solution is to try and get all 13 year old girls to no longer be sold for sex.
that makes zero sense! I'm gonna try and follow his logic here: he says the market is too vast. ok. we should shatter those structures and vast markets. ok. we gatta be absolutely sure that 13 year-old girls are no longer sold for sex any more.
so, could he be implying that he really wants to return to traditional markets without wifi on every street corner and just the regular old 18+ year-olds sold for sex?
(sorry for the crude comment. it is not meant in harm. after thinking about it more than 10 seconds, I have no idea what kind of world he wants to create!!)
EDIT: I would imagine that what he really want's to do, is invest all that cash into google, install wifi on their street corners along with a chromebook so they can get them some form of education, and then track all their communications, to be 100% sure that they're not being sold for sex.
There seems to be a lot of concern in this discussion about charities that have too much overhead, or people who work for charities that pull in salaries competitive with for-profit. This econtalk with Dan Pallotta presents an interesting counter-narrative. He says the non-profit sector is held back by attitudes that discourage competing for top talent, risk-taking, and innovation. If any group would be sympathetic to these arguments it might be HN readers, but I suspect that these biases are pretty persistent.
To be fair, they have devoted a top level navigation link to their page of mistakes. It seems like they try very hard to be transparent these days, even going so far as to publish notes on conversations with charities.
But that was a shameful and embarrassing episode for them.
Correct. I realize that I've been talking about this book a lot on HN lately, but Ken Stern's With Charity For All discusses both the promise of Givewell and the challenges—specifically, few nonprofits actually measure, or want to measure, the efficaciousness of outcomes. I'm a grant writing consultant who works primarily for nonprofit and public agencies, and by and large I tell clients not to worry about evaluations because funders don't care about them in a substantive way: http://blog.seliger.com/2008/04/24/studying-programs-is-hard....
Yesterday, j_s asked about Dan Pallotta's work, which is in the same vein; if you're interested in this subject, follow j_s's links: https://news.ycombinator.com/item?id=6104569.
I'm voting this up because it seems a heartfelt reaction against figuring out that charitable giving is its own scam -- a scam by well-meaning people all out to do good in the world, but a scam. By that I mean that there is no feedback loop in place to assure the donors that they're wrong. Every deal is one to save the day. Every idea is some great idea from one place transplanted somewhere else. There's a business in assembling ideas into attractive memes and then getting rich people to make themselves feel better by paying for them. A very big business. So hats off to Buffett for pointing it out. I especially like the term “conscience laundering”
Having said that, I call bullshit here. While he's done a bit of fumbling around at what his end of the problem looks like, and he's certainly correct that preventing slavery beats the shit out of having free wi-fi, I'm not feeling he has any better idea of what the hell he's talking about than the folks peddling the latest charitable cause. And he admits as much. So as a plea for the system being broken, count me in. As any indication of way forward? It's not in the essay.
I also want to point out that everybody seems to understand that you make money in your life one way, you may find value in a completely different way. But people giving money, most of which are rich, seem to be completely detached from this concept. Working in a factory for two bucks a day and not starving, while watching your family grow up and being involved in some religious or civic group might be a freaking ton better than not being "exploited" We cut ourselves slack for finding value in things other than money, but we do not allow the same privilege to others. Because charities run on dollars, we tend to subconsciously value their lives in dollars as well. Bad premise.
Since the solution space is so thin, I'll take a flyer on what he might like to see. As opposed to the latest in charitable wizardry, my ideas and five bucks will get you a cup of coffee.
Societies evolve by the flow of information and goods contributing to an open market. Information flow to people? Education. Unrestricted goods flowing to an informed buyer? A win for all parties. Innovation and solutions formed by cross-pollinating folks with radically different backgrounds and knowledge? Another win for everybody. It's all information and trades. Bad societies control information and trade. Good societies let a thousand flowers bloom and grow by productive creative destruction. So far, many folks are on-board with this. But what we continue to forget is that forms of society itself is just another structure that can benefit from these same principles.
My position is that the problem here lies in our hidden assumptions. Every charitable intervention has a bunch of a priori assumptions made about what would work or wouldn't. As Buffett said, many times it's just playing MadLibs with good ideas. This is the wrong way to look at the problem, and will continue to lead to suboptimal solutions.
If you're looking to do something radical, encourage governmental units to become much smaller. Instead of having one third-world country rule tens of millions over a large area, replace it with a hundred smaller governments with much less land area. Create zones where completely new ways of getting along can be tried -- a new form of socialism, radical objectivism, whatever. Instead of arrogantly thinking we know the answer to the problems and they must fit into one of our predefined categories and work inside existing societal structures, work on giving people ownership and control over trying zillions of their own ideas, and let's all watch and see what works for them. In this way, we actually create a huge pool of new information that didn't exist before about what works or doesn't work in various circumstances instead of just rehashing theory. This information can be shared and will have value to many millions more. And then we can all move forward.
Our problem is that we insist on taking highly-complex and intricately-detailed problems and then solving them by banging on them with feel-good hammers of convenient and easily-understood slogans from our own life experiences.
I totally agree with you and would like to point out some of the work being done (and the major govt obstacles faced) by people like Earthship inventor Michael Reynolds in Taos, New Mexico.
In the same way that big business has no interest in being disrupted, it seems that governments have a similar weight and a similar self-preservation interest.
Regardless, this is the good fight worth fighting.
To take your $5 and raise you 5 more, this can be down scaled even further to the level of the individual or family unit. Here in the heart of Los Angeles (Venice/Fairfax), we have created a sort of permaculture oasis with 25+ fruit trees and various semi-professional/DIY systems of self-sustenance. This is work that is A) inherently rewarding B) able to inspire others and C) is a living, breathing example of the world we want to live in, and is significantly easier than most would think, especially if you learn slowly over 5+ years.
I highly recommend the documentary on Michael Reynolds. His work is far ahead of its time and shows that there are existing lifestyle repos ready to be forked and branched and then merged back into a continuously integrated updating best-way-to-live OS. The doc is here: http://www.youtube.com/watch?v=QVX2wdDH19Y
"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."
First, wifi on every corner is progress. Second, you might need wifi on every corner to prevent the sex slavery. Third, even if you don't need the wifi, you can have both the arguable utility of wifi for the poor, and stop the sex slavery.
I don't understand how anyone can fail to see the spread of the internet as a big step in the spread of knowledge, fail to marvel at our modern day printing press and all the good it has done. "Internet everywhere" seems like a pretty good philanthropic strategy to me.