How caring are our wealthy : Update
The recently published AFR piece on the top 50 “givers” (philanthropic donors) over the last year provides a unique opportunity to try to calibrate perhaps just how “giving” our most wealthy actually are.
I am not going to spend a lot of time in this post talking about whether wealthy people should give.
(see an old post on this some time back https://medium.com/@daniel_1959/philanthropy-by-numbers-490bdcbc6d08
and the postscript version https://medium.com/@daniel_1959/philanthropy-by-numbers-postscript-92c9066e4edb) both discussing whether rich people should give or not.
What follows is a quick summary of my view — expressed in the words of someone else.
Andrew Carnegie (US Industrialist who wrote the Gospel of Wealth in the 1889) captured the issue of wealthy giving when he said;
“Poor and restricted are our opportunities in this life; narrow our horizon; our best work most imperfect; but rich men should be thankful for one inestimable boon. They have it in their power during their lives to busy themselves in organizing benefactions from which the masses of their fellows will derive lasting advantage, and thus dignify their own lives.”
As to passing on wealth Carnegie included this accurate observation (very applicable to Australia!)
“There are instances of millionaires’ sons unspoiled by wealth, who, being rich, still perform great services in the community. Such are the very salt of the earth, as valuable as, unfortunately, they are rare.”
And if you are at all confused he sums it up this way….
“The man who dies thus rich dies disgraced”
Or, just quickly, here is what the second richest man in the world thinks (Warren Buffet) on the topic of philanthropy;
“If you’re in the luckiest 1% of humanity, you owe it to the rest of humanity to think about the other 99%”.
Of course Warren Buffet has committed that nearly all his wealth (let’s say 90%) will go to charitable donations, as will nearly all of the wealth of my old boss, Bill Gates.
So here is the latest snapshot of the 50 Biggest Charity Donors last year.
Australia’s 50 biggest givers
To make it onto the Philanthropy 50 list in 2019, you need to have donated at least $3.6 million in the previous…
What you see is that the late Paul Ramsey’s Foundation donated an impressive $85m, followed by the Forrest (Minderoo) Foundation at $60m. The Forrests have also just announced another $600m plus to go into their philanthropic foundation — they are fast becoming Australia’s greatest ever living philanthropists and an example to all.
So far so good. However to get into the top 50 the cut off was $3.6m and to be in the top 25 the cutoff was only $5.6m. So other than a few outstanding examples (maybe 10–20 families) the level of giving is pretty low. It seems that we have a few (very few) truly caring wealthy families but then the level of donations drops like a stone.
If you look at US donation statistics of their most wealthy you see that the average wealthy American donates around 15% of their wealth to philanthropy.
Let’s now turn to the list of Australia’s most wealthy.
2018 AFR Rich List: Who are Australia’s richest people?
The rich like to envelop their wealth in discretion and the odd secret or two. But they also appreciate accuracy. Hence…
Now the fun part begins…
If we assume that someone who donates 15% of their wealth as a one off donation to their family foundation and that foundation has to (under Australian Philanthropic Fund laws) give away 5% of this corpus per year then you can say that a 15% allocation as a one time gift to philanthropic giving is kind of like donating 0.75% of your wealth per year.
This means that using this % of net wealth (0.75%) then to get into the bottom 50 of givers ($3.6m) your wealth needed to be around $480m. Let’s leave to the side whether someone with $480 could part with more than $3.6m per year. My 2c worth is they could give a ton more!
Using the same ratios to get into the top 20 donors ($5.6m) you needed to have around $750m..Ok then.
To be in the top 20 donors you needed a wealth of $750m yet to be in the top 20 of wealthy (same AFR sources) you needed to have $2.8b in accumulated wealth. Surely in a world where our wealthy realise their luck and their responsibility to the society where they made their wealth, these numbers should be aligned?
To be in the top 50 donors you needed a wealth of $480m and yet to be in the top 50 of wealthy you needed to have $1.4b in accumulated wealth.
Ahhh I see a pattern emerging.
Said another way.
If you are the 20th wealthiest person in Aus with a wealth of $2.84b and you give in the same ratio as the average wealthy American then you would donate around $21.3m (not the $5.6m that gets you there). Or if the 50th wealthiest person donated in the same ratio as the average wealthy American then they would have donated $10.5m (not $3.6m).
To get into the top 200 (of wealthy) last year you needed $387m which (using the same maths) would produce a donation of around $3m.
Also note that the cut off for the top 50 donors moved from $3.3m last year to $3.6m in 2018 — a short way of saying our wealthy are not really getting on to the giving train with much haste.
In short, other than a few celebrated examples, Australia’s wealthy continue to be a pretty greedy bunch, donating the minimum possible to allow themselves to be referred to as philanthropists and then getting the adulation associated with “giving”.
It is not a case of how much can I afford to give but rather how little can I give to take the focus away from my growing mountain of money.
All in all it is clear that the majority of our wealthy simply do not care about their fellow Australians — nor the millions if not billions of other humans around the world dealing with severe hardship on a daily basis.