America's Super-Rich Aren't Big On Sharing

America's Super-Rich Aren't Big On Sharing
By GREGG EASTERBROOK Special to the Los Angeles Times
Published: Mar 25, 2007
There are hundreds of people in the United States with so much money that they will never be able to spend their net worth, no matter how many Picassos or mansions or personal jets they buy.
Last year, for the first time, everyone in the Forbes 400 index of the super-wealthy was a billionaire. Sales of 200-foot-plus yachts and other indulgences of extreme wealth are at record highs. Income for the top 1 percent of Americans has more than doubled in the past quarter of a century, while that of the bottom fifth barely budged. The rich, in short, are getting steadily richer, in absolute terms and compared with the rest of society.
Yet with the sainted exception of Warren Buffett and maybe Bill Gates, virtually all of them refuse to give any meaningful fraction of their wealth to the less fortunate - or even to give a decent fraction to such endeavors as art or medical research, which they would benefit from.
Consider the numbers (which are based on current estimates in the recent Slate 60 index of the year's leading philanthropic donors and the net-worth estimates in the Forbes 400). The 60 leading American donors gave away $51 billion in 2006, according to Slate. They were led by Buffett, whose spectacular $44-billion donation - mainly to the Bill & Melinda Gates Foundation, whose primary cause is health care in the developing world - was the largest gift anyone has ever given. These donors had an estimated combined net worth of $630 billion last year, meaning that they gave away 8 percent of their money, on average. Sounds magnanimous, until you consider that the Dow Jones industrial average rose 16 percent in 2006 - which suggests that, as a group, the leading donors contributed less than they gained.
Now subtract Buffett and his generous gift from the group, and the rest of them begin to look downright miserly, handing to others a mere $7 billion of a combined net worth of $584 billion - or slightly more than 1 percent. Numbers from the philanthropy watch organization Giving USA show that Americans as a whole annually give away about 0.5 percent of their net worth. So, except for Buffett, society's top givers donate to others at only a tad higher rate than the population as a whole. That's, well, pathetic. And that's just counting top givers, not the super-rich who give away little or nothing.
Microsoft mogul Paul Allen, net worth $16 billion, gave away $53 million in 2006, according to Slate - one-third of 1 percent of his fortune. Software magnate Lawrence Ellison, net worth $20 billion, gave away $100 million - half of 1 percent. Pierre Omidyar, founder of eBay, net worth $7.7 billion, gave away $67 million - less than 1 percent. Nike tycoon Philip Knight, net worth $7.9 billion, gave away $105 million - slightly more
than 1 percent.
Donations of this sort, in the multimillion-dollar range, inevitably mean a lot to charities or schools, and of course it is certainly preferable that the super-rich give millions rather than nothing at all. But for those whose net worth soars into the billions, even $100 million is a pittance compared with what they have the means to give.
Gates, one of history's richest men, has given $26.2 billion to the Gates Foundation, according to a spokesperson, and for this he has been widely praised. Gates and his wife were two of Time's Persons of the Year in 2005, exalted in a cover story as grand philanthropists. Yet $26.2 billion is crumbs from the table compared to what Gates might give. Even after the donations, his net worth is about $53 billion, according to Forbes.
Converting to today's dollars, during his lifetime the industrialist Andrew Carnegie gave away $8 billion of his $10.3 billion net worth, or 78 percent, according to Carnegie Corp. figures.
Why do the super-rich hoard? Certainly not because they need money to spend. As economist Christopher Carroll of Johns Hopkins University points out in an upcoming paper, the super-rich save far more than they could ever spend, even with Dionysian indulgence. Gates' fortune must throw off, even by conservative estimations, about $6 million a day after taxes.
Carroll speculates that the super-rich won't give away money they know they will never use for two reasons: because they love money and because extreme wealth confers power. We know already that people who give their lives over to loving money surrender their humanity in the process. As for clout, Carroll quotes Howard Hughes: "Money is the measuring rod of power." Runaway wealth accumulation by zillionaires, combined with the rising share of national income claimed by the top 1 percent, often inspires calls to soak the rich. But I disagree. The magnificent productivity and innovation of the U.S. economy is fostered by the same market forces that cause big fortunes. This leaves us with one final question: What is the effect of wealth on the wealthy themselves? Psychologist Edward Diener of the University of Illinois interviewed members of the Forbes 400 and found them only slightly happier than the population as a whole.
Ebenezer Scrooge discovered that giving money away is life's most pleasurable act. Why do today's super-rich devote so little of their wealth to engaging in life's most pleasurable act?
Gregg Easterbrook is a fellow of the Brookings Institution and author of "The Progress Paradox" and a novel, "The Here and Now."