Warren Buffett and Bill Gates unveiled The Giving Pledge initiative in June which launched one of the most ambitious philanthropic initiatives in history and has the potential to generate hundreds of billions of dollars in gifts over the next few decades.  Both Warren Buffett and Bill Gates have already pledged the vast majority of their wealth to charity and the goal of the pledge is to encourage other billionaires to do the same. Surprisingly, the initiative has generated a significant amount of controversy among those who believe that it is politically motivated.

“Publicity Stunt” or “Work of Socialists”?

Fortune Magazine recently ran an extensive cover story on The Giving Pledge which outlined the goals of the initiative and the story behind how the idea came about.  According to The Weekly Standard, reader reaction to the Fortune profile was overwhelmingly negative with many comments attacking the pledge as “grandstanding”, a “publicity stunt”, or “the work of socialists”.

Apparently, some readers took issue with the concept of making a public push for billionaires to join the initiative while others seem to cast doubt on the idea of philanthropy in general. Underlying these comments is a sense that wealthy Americans are somehow being “shamed” into signing up and that the underlying message is that it is illegitimate for these individuals to wish to pass on a majority of their wealth to heirs.  An even less diplomatic response appeared on GuruFocus recently where the author stated that he would “throw Buffett out.  And his little buddy [Gates] too” if they came calling for his participation.

Criticism is Unwarranted

None of the points of criticism are very persuasive.

First, The Giving Pledge is obviously not a publicity stunt.  Both Mr. Gates and Mr. Buffett have spent many years thinking very carefully about philanthropy and how to intelligently deploy their wealth for the benefit of mankind.  Mr. Gates gave up his career managing Microsoft in order to pursue philanthropy full time at The Bill and Melinda Gates Foundation.  Mr. Buffett has been making very large donations to the Gates Foundation as well as several family run foundations and will eventually donate over 99 percent of his estate to charity.  A publicity stunt lacks substance while The Giving Pledge is clearly the product of serious thought and consideration.

Second, the pledge is not an attempt to embarrass or humiliate people who are not on the list.  Charlie Munger, Mr. Buffett’s longtime business partner and a very generous philanthropist, is not on the list at this point.  Obviously, not everyone wishes to make a public declaration of support, and this most likely includes individuals like Mr. Munger who have already made substantial gifts to charity.  It makes no sense to think that Mr. Buffett would do something to embarrass or alienate one of his closest colleagues.

Third, the pledge is not about politics or “socialism”.  In fact, the concept is entirely the opposite and is profoundly anti-government in the sense that it encourages the wealthy to take responsibility for the disposition of their wealth personally rather than allow the government to tax their estates at death and decide on how over half of it should be distributed.  One can argue that the current repeal of the estate tax should be extended beyond the end of 2010, but this is a separate public policy debate.  It is true that Bill Gates and Warren Buffett  both oppose the permanent repeal of the estate tax.  Some might argue that they oppose repeal precisely to force the wealthy to give away their estates rather than face taxation, but it does not follow that a voluntary pledge is therefore an exercise in “socialism”.

Invest in Business Rather than Philanthropy?

Others have made the case that the very wealthy should devote their money to starting new businesses that will create jobs and new wealth for society rather than pour money into philanthropy.  This concept has appeal particularly because most of the self made billionaires are proven business leaders and have the potential to further compound their wealth in business.

However, at a certain point, it is natural for the very wealthy to look for good causes to support.  America has a long tradition of philanthropy involving famous names like Rockefeller and Carnegie.  Given the fact that there are plenty of individuals who fall through the cracks of a market economy, there is nothing wrong with looking to philanthropy to improve conditions.  In fact, relying more on philanthropy and less on bureaucratic government efforts is an inherently conservative approach to addressing poverty and human suffering.  It could even be considered the opposite of “socialism”.

Even those who are economically conservative and oppose most of the tax policies Mr. Buffett advocates (and this writer more often than not finds himself among those opposed) should have enough objectivity to avoid making a great philanthropic initiative seem like a craven political act.

Warren Buffett, Bill Gates, and Melinda Gates recently discussed the rationale behind The Giving Pledge on The Charlie Rose Show.  The interview is well worth watching for those who are not convinced that the initiative is being put forward in good faith.

Disclosure:  The author of this article owns shares of Berkshire Hathaway.

The Giving Pledge Runs into Unwarranted Controversy
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6 thoughts on “The Giving Pledge Runs into Unwarranted Controversy

  • August 14, 2010 at 5:44 pm
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    I for one was very skeptical of this. I am a huge fan of Buffett the businessman, but people need to face the facts, Buffett has turned into a straight up far left socialist cheerleader. He has grown totally out of touch with reality. Cheerleading on new taxes, big government and bailouts. How he got this way, when his father was a hardcore libertarian congressman akin to Ron Paul is the real question.

    • August 14, 2010 at 6:05 pm
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      Where has Buffett supported nationalization of the factors of production and centralization of decision making regarding business activity? Reason I ask is that the last time I checked, the definition of “socialism” was a bit more than “I don’t agree with someone on a specific policy issue.”

      • August 14, 2010 at 6:50 pm
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        Ravi, your correct about that. Socialism isn’t the correct word. But in a society where the government spending is over 40% of GDP we aren’t operating in free market capitalism either. I think government spending from the founding of the country until about 1913 was about 6% of GDP. So if this isn’t socialism then what is it?

        Firms with the most connections to the government – such as Goldman Sachs are the ones incrasingly propsering while smaller ones are being pushed out due to all the regulations and taxes. AIG, GM, Fannie Mae and Freedie Mac have all been effectively nationalized as well.

  • August 14, 2010 at 9:39 pm
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    We’re definitely trending in the wrong direction in my opinion, so I agree on that point. I’m conservative on fiscal issues and disagree with virtually everything that has taken place over the past two years, with the exception of TARP which I believe had to be done to avoid a complete meltdown in the fall of 2008.

    I often disagree with Warren Buffett’s views on tax policy, but he was correct on TARP in my opinion. He also made comments regarding ways in which the stimulus could have been more effectively targeted toward infrastructure rather than some of the pork that we have seen. The main point in the article was that it makes little sense to connect his charitable giving with politics as many seem to have done. The comments thread on the Seeking Alpha version of this article shows what a firestorm The Giving Pledge has generated – to me it just makes no sense that this could be controversial:

    http://seekingalpha.com/article/219918/comments

  • August 21, 2010 at 1:52 pm
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    This talk that Warren Buffett is a socialist has no basis.

    He is a crony capitalist and is solely focused on himself and his companies. He enjoys winning and it is good he is planning to give it back instead of creating war.

    When Munger mocks the very crony capitalism that keeps Berkshire strong people should pay attention. Even Buffett does not try and pretend the country is not harmed in the long run, he just shrugs.

    The latest headline scandal of WPO is one of many reminders the true nature of Berkshire.

    • August 21, 2010 at 1:58 pm
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      I have no idea what you mean by “crony capitalist” – please list the political favors that Berkshire has secured in recent years. In most cases, the political winds have not favored Berkshire in recent months.

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