Saturday, September 22, 2007

There are no pockets in a shroud

Duty Free Shoppers (DFS) founder gives away $4 billion in his lifetime.

With so much giving from all sorts of rich people, and with so much government charity, why does poverty not just pack up and run?

Update: It seems Robert Reich is proposing some new ideas for the non-poverty charitable donations that Rahul is referring to in the comments below.

Link
Comments:
You seem to suggest that charity/giving is largely targeted at removing poverty. I would disagree.

When a colleague of mine won a scholarship from Bill & Melinda Gates Foundation to study economics at Oxford, we joked that if she forwent her scholarship, that much money (>50k pounds) would easily buy water supply systems for scores of Indian villages (rural water economics had won her the award). There is an element of truth in the joke...a large chunk of money in poverty/health/education go into rather elitist pursuits. There is of course the argument that providing opportunities for people from developing countries to get a world-class education will help pull up their societies, but from my perspective that correlation is rather weak.

Secondly, a lot of giving is simply not meant to remove "first-order" misery. For instance, many art museums are founded on large amounts of seed money that come from philanthropists. Surely, this money shows up on the Forbes' register as 'charity'. The role of fine art in society is undeniably important, but does it remove poverty? Similarly, the best universities in this country get millions in donations...without meaning to undervalue the role of these institutions in advancing knowledge and economies, what is the impact of a dollar donated to Harvard on pulling a family above the poverty line?

Another anecdote (i should really stop now): I have recently been working with 'gun clubs' or 'duck clubs' in northern California. These are essentially large land holding (>1000 acres)which are privately owned by the clubs and maintained as duck habitats for avid (and rich) recreational duck hunters. The association of these clubs is listed as a non-profit and money donated to it is classified as charity/giving. Take one look at their declared donations though...there are dozens of donors who top $100k and at least one over $1m. This money goes towards "protecting duck habitat"....but the duck hunters arent doing it for sustenance, most of them fly to the clubs in private jets from all over the country.

Rahul
 
Amazing! What percentage of charity you reckon goes into removing 'first order' poverty/misery?
 
I was going to say 15% off the cuff but thought it was too pessimistic so did some research. Its actually worse, only 11%.

Look here.

Couldnt find world statistics handily, but here are key numbers for recipients of US donations:

Religion: 60%
Education: 21.6%
Basic needs:11%
Arts: 11%
Health: 6%

Might be argued that education and health improvement contribute to poverty mitigation, but then found another study which shows that much of the giving to education goes to top-end universities (and not, say, to primary schools which impact poverty more directly).

I found it interesting that patterns of donations by high net-worth households (Feeney, Buffett etc) are significantly different than the average figures quoted here, although not in a way as to alter our discussion about impact on poverty.
 
Very, very enlightening indeed! There are lots of interesting nuggets in the report. So the story is not all that different from Rajiv Gandhi's "7 paisa out of each rupee"... It's almost a corruption of philanthropy.
 
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