The rich want a better world? Try paying fair wages and tax

| Peter Wilby | Comment is free | The Guardian

It is surely admirable – isn't it? – that 40 US billionaires, led by Bill Gates and Warren Buffett, have signed the "giving pledge" to donate half their fortunes to charity. Far better that they open their wallets to deserving causes than that they spend yet more money on yachts, carbon-emitting private jets or garish mansions. Well, yes. Salute Gates, whose foundation has already saved perhaps five million lives through the development and delivery of vaccines against diseases such as TB. Salute Buffett who says his children won't inherit "a significant proportion" of his wealth. The filthy rich, or some of them, have shown they have a heart.

But let's be clear. Money paid to charity is exempt from tax; the US treasury already loses at least $40bn (£25bn) a year from tax breaks for donations. So billionaires, not the democratically elected and (at least theoretically) accountable representatives of the people, get to decide on the good causes. Those who already wield enormous economic power can determine social priorities too. Of course, the poor also contribute to charity but most don't get the tax breaks because they don't pay income tax.

As Michael Edwards, a former World Bank adviser, asked in a study for the thinktank Demos, Small Change: Why Business Won't Change the World: "Why should the rich and famous decide how schools are going to be reformed, or what drugs will be supplied at prices affordable to the poor, or which civil society groups get funded for their work?" And even if they give away half their money (or 99% in Buffett's case), billionaires will still be rich. Their generosity, however, helps to legitimise inequality and head off political protest. Some of them may become even richer, because charitable giving is good marketing and, sometimes, can be used to tie recipients into buying the donors' products and services.

You may think, if we're talking about mosquito nets to stop children dying from malaria or drugs for HIV, that it doesn't matter where the money comes from. In the short term, it probably doesn't. But rich business people tend to bring their own values to charitable giving, and there's a danger they will undermine those of the voluntary sector. One billionaire who signed the "giving pledge", the Oracle founder Larry Ellison (worth $28bn), has said: "The profit motive could be the best tool for solving the world's problems."

Wealthy benefactors usually want efficiency, clearly defined targets, measurable outcomes, quick results. They tend to select charities as they would select suppliers of goods and services to their companies. Some bodies provide data that help donors decide which charities to support: in the US, for instance, GiveWell records effectiveness according to "the most lives saved for the least money". These things aren't necessarily wrong – many charities would benefit from more rigour – but they don't always translate easily to the voluntary sector. They are not readily applicable to the more diffuse, long-term aims of civil society organisations, nor to their more transparent, less top-down decision-making processes. Just as market approaches carry dangers when applied to public services, so they do when applied to charities. The emphasis on "rates of return" and "value for money" may exclude people in great need who happen to be difficult to reach or, even if made fit and healthy, would be of marginal economic utility.

"Philanthrocapitalism", as it has been called, veers towards tackling symptoms of poverty and distress rather than underlying causes. Gates has done admirable work against TB, malaria and Aids, and begun work against diarrhoea and pneumonia, which are much bigger killers. He and his wife Melinda have started to talk about clean water supplies, inadequate housing, public health infrastructure and agricultural productivity.

They are undoubtedly among the most sophisticated of the new philanthropists. But it seems doubtful they will move into considering issues of, say, land ownership and distribution. The Gates Foundation wants to "give where we can effect the greatest change". But the greatest change is likely to come from transforming the economic system and the pattern of property ownership. Will Gates fund projects that undermine his own power and economic status?

There is another danger: that the poor are written out of their own story, that business tycoons, accustomed to getting their own way, do things to the poor, rather than with them. As Edwards sees it, business leaders threaten the distinctive values of civil society: commitment and co-operation. Great social causes, he points out, are not mobilised by the market or led by billionaires. "The civil rights movement, the women's movement, the environmental movement, the New Deal, the Great Society – all these were pushed ahead by civil society and anchored in the power of government as a force for the public good. Business and markets play a vital role in taking these advances forward, but they are followers, not leaders."

I repeat: we should welcome the Gates-Buffett initiative and applaud those who have joined it. Generous, public-spirited billionaires are preferable to mean ones. But remember that two-thirds of US corporations contrive to pay no federal income tax at all and that transfer pricing alone – a legal device, used, for instance, by Ellison's Oracle Corp, that converts sales in one country to profits in another where tax liabilities are low – deprives the US treasury of $60bn annually. Such sums, which pile more taxes on the poor and reduce funds for government projects that advance the public good, dwarf what the 40 billionaires propose to give away.

If the rich really wish to create a better world, they can sign another pledge: to pay their taxes on time and in full; to stop lobbying against taxation and regulation; to avoid creating monopolies; to give their employees better wages, pensions, job protection and working conditions; to make goods and use production methods that don't kill or maim or damage the environment or make people ill. When they put their names to that, there will be occasion not just for applause but for street parties.