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The
Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism
by Claire Gaudiani Rating: ••• (Recommended) |
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Generosity Claire Gaudiani presents a compelling case
in her new book, The
Greater Good. She proposes that we are rich because we are generous. Here’s
an excerpt from the beginning of Chapter 6, “Generosity and The Future of
Democratic Capitalism,” Gaudiani calls the heart of the book (pp. 134-41): Yet the true friend
of the people should see that they
be not too poor, for extreme poverty
lowers the character of the democracy;
measures therefore should be taken which
will give them lasting prosperity; and as
this is equally the interest of all
classes, the proceeds of the public revenues
should be accumulated and distributed among
its poor, if possible, in such quantities
as may enable them to purchase a little
farm, or, at any rate, make a
beginning in trade or husbandry. —ARISTOTLE, Politics A man
of humanity is one who, in seeking
to establish himself, finds a foothold for
others and who, desiring attainment for
himself, helps others to attain. —CONFUCIUS, SIXTH CENTURY B.C.E. The
previous chapters, with their examples of investments in human capital,
physical capital, and intellectual capital, show the power of personal
initiative and generosity, the power of social entrepreneurialism to improve
our society and our economy in America. They also offer compelling testimony to
the potential long-term health of American democratic capitalism. By most metrics, the United States
is now the most successful and prosperous country in the world. The majority
of our citizens enjoy a higher standard of living and per capita income and
the nation enjoys a higher sustained rate of economic growth than any other
country with this level of diversity in the population. Moreover, the United
States has led the world in technological innovation and the creation of
intellectual property, particularly in quality-of-life fields such as
software development, biotechnology, materials science, and pharmaceuticals.
Moreover, we accomplished these things because we have been able to
utilize the most diverse and mobile population in the world. The question we
face together is whether we can sustain and grow our philanthropic spirit in
the face of increasing material wealth and personal well-being. Will we fall
away from the commitments to philanthropy that have strengthened our social
and economic health? Many challenges confront us, both domestic and
international. I will focus on the domestic ones because the problems in the
two arenas are closely related and addressing them first at home will make
changes we undertake overseas more believable at home and abroad. In the
coming pages, I will delineate the role that generosity must play in their
successful resolution. But in order to understand what really matters for
success in the future, we need to reflect a bit more on the lessons to be
learned from the preceding chapters. First, the development of human,
physical, and intellectual capital via philanthropic investments sustains our
belief in upward mobility as a democratic imperative.
Second, that development relies on the commitment of Americans
to the pursuit of happiness. I want to draw your
attention to these two fundamental factors because they define our success as
a nation some 230 years after our founding. These inseparable drivers of
personal and collective growth distinguish our economic, social, and
political ambitions from those of other nations and can serve, in my
judgment, as the best guides for our economic and social health going forward.
Each is tied to generosity and must be understood if our democracy and our
brand of capitalism are to endure successfully for the next century. To
achieve that longevity, our society will have to deal imaginatively with the
economic and social problems that face our nation in the first decades of the
twenty-first century. The second part of this chapter describes these
challenges and reviews how a dramatic increase in philanthropy can enable the
country to make important progress just as it has at other critical moments
in U.S. history. UPWARD
MOBILITY Upward mobility is an excellent measure of the
dynamism of the relationship between democracy and capitalism. It quantifies
how well the idealistic promises of democracy are actually working for those
in the weakest position in the economy. "The rate at which people move
up through the income-distribution categories vividly shows how well the
economy is building human capital and whether it is enabling wealth building
in the very groups that need investment before they can achieve economic
progress. For generations of newcomers who have chosen to
immigrate to American shores, the U.S. economy and its education, health, and
social services—despite significant flaws—have generally rewarded hard work
with economic and social progress. The stories of countless millions of
immigrant families attest to the truth of this statement. Our society opens
opportunities and rewards highly competitive, dedicated efforts, if not
always immediately in the first generation, then in the second and third
generations resident here. Democracy offers justice and equality of
opportunity to each citizen. It grants the promise of, in short, upward
mobility. This has worked dramatically better for whites than for people of
color, but consciousness of this issue has created significant progress over
the decades since the beginning of the civil rights movement. How robust is upward mobility today? For instance,
what percentage of the people who were once in the bottom quintile of the
income distribution in the United States are still stuck there fifteen or
twenty years later? Pause and take a guess at the answer to this question.
It's likely to surprise you. The Dallas Federal Reserve Bank asked almost the
same question in 1995. The Fed used the University of Michigan's Longitudinal
Panel Study, which has collected information from the same people every year
since 1968 to document their status for social science researchers' Looking
at the people in the bottom 20 percent of the income bracket, the Fed report
states: The
conventional view leads us to think they were worse off in the 1990s. Nothing
could be further from the truth. In the University of Michigan sample, only
5 percent of those in the bottom
quintile in 1975 were still there in
1991 [author's italics]. Even more important, a majority of these
people had made it to the top 60 percent of the income distribution, middle
class or better, over that 16 year span. Almost 29 percent of them rose to
the top quintile. The
story is almost as good for other income brackets. More than 70 percent of
the people who were in the second-poorest quintile in 1975 moved to a higher
quintile by the end of the study in 1991. Twenty-six percent got right into
the wealthiest quintile. Those in the middle fifth also did well, with almost
half of them moving to the second or first quintile. More than 30 percent of
those in the second-highest quintile in 1975 moved up to the top category by
1991. This kind of movement characterizes upward mobility and wealth-building
opportunities for those at the bottom. Some smaller percentage fall back each
year, and, of course, new arrivals and new families, often new single-parent
households, refill the bottom quintile.3 Only 5 percent of the people who
were in the bottom quintile in 1975 were still stuck there in 1991! If you guessed wrong about this, you are not alone.
When I interviewed colleagues on Wall Street and a number of faculty members
from different universities, they guessed, on average, in the 60 percent range.
Some even guessed that as many as 85 to 90 percent of those in the bottom
quintile in 1975 were still there in 1991. Few people, even those in
financial services or higher education, realize how powerfully our economy
works for an individual. Moreover, people in this country generally believe
that they can move upward. They have faith in the American economic and
social system as a vehicle for their own personal advancement. Critics of
capitalism have long argued that lower-income groups will, over time in a
competitive market economy, become chronically discouraged and angered and,
finally, will rise up, riot, and take down the system. Is this kind of anger
and dissatisfaction apparent in the United States? Harvard economists Alberto
Alesina and Rafael DiTella and Robert MacCulloch of the London School of
Economics focused an investigation on this question: How does income
inequality affect the happiness of Americans as compared to Europeans? Are
Americans, particularly those in the lowest-income levels, happy with our
income distribution, or do we teeter constantly on the verge of revolution?
Using surveys of 123,668 answers from people in the United States and twelve
European countries over a twenty-three-year period (1972-1994), the
researchers found that the poor in the United States are as content about
income inequality as the other quintiles in this country. The group of people
with the least money did not express unhappiness about the fact that incomes
are unequal in this country. In fact, most people in the United States and
in those twelve European countries said that they were not unhappy about
income inequality. The only groups who were significantly unhappy
about income inequality in their own countries were the poor in European
countries and the wealthy in the United States. And this data was collected
at a time when income disparity was actually widening in the United States! These results show that, in general, Americans seem
to be less affected by income inequality than Europeans. Further investigation
of the results across income levels and ideological groups indicates that the
wealthy and the right-wingers in European countries express very low concern
about income inequality, while the European poor and its leftists express
strong negative attitudes to it. On the contrary, in the United States
neither the poor nor the left-wingers feel strongly about income inequality.
Only the wealthy reflect somewhat negatively on it. The
researchers worked to interpret these outcomes and asked, "Do differences
of opinion simply reflect different preferences about the merits of equality
on the two sides of the Atlantic? . . . Is a preference for equality just a
matter of "taste," or does it
reflect something else in society, such as the level of social mobility?"
They surmised that if objections to inequality were a matter of taste, then
the wealthy in various countries would be likely, perhaps, to have the same
views of it—for instance, seeing equality as a luxury good or even a normal
good for which demand rises as income increases. This is clearly not the
case, because the rich in America and those in Europe have exactly opposite
views of inequality. So, the researchers conclude, "A more reasonable
interpretation is that opportunities for mobility are (or are perceived to
be) higher in the United States than in Europe.” Americans' belief in social mobility could
logically account for the tolerance of inequality by all but the rich because
all other categories, given their belief, have room to move up while the rich
in a mobile society see that they can only move down. Europeans, without
confidence or much experience in upward mobility, could be predicted to rank
exactly as they do in the survey. The rich, who are already at the top in a
society where mobility is not significant, are content with where they are
and are likely to stay. The poor, conversely, are stuck in a bad place from which they
have little hope of emerging, hence their higher levels of discontent with
inequality. This hypothesis is supported by large amounts of
poll data published by Everett Ladd and Karlyn Bowman in 1998.7 They report
that Americans are tolerant of inequality as long as they see that,
generally, wealth is the result of personal output and that everyone can make
it if enough talent and hard work are devoted to the task. Of course, not
everyone believes this, but extensive polling of Americans indicates that the
more people who believe that opportunities for wealth remain reasonably open
to everyone, the more tolerance Americans show for inequality. This is a critical point and a major asset to our
society that I believe we must sustain. Our belief in upward mobility
provides the foundation for wide-reaching prosperity without creating
crippling class animosity, disruptions, or, worse, class-based violence. As we have seen in previous chapters, this upward
mobility did not happen by accident. Upward mobility for the great majority
of people is not what might be expected from a free-market economy.
Capitalism works as a great wealth concentrator and a weaker wealth
distributor. This means that in capitalism, wealth builds wealth. People with
some money can invest it in new projects and can often make even more money.
So wealth tends to build where it is already in place. Capitalism tends not
to distribute or redistribute wealth into the population. Our current success is, in part, the fruit of
extraordinary generosity and outstanding persistence to ensure that tax and
other laws continue to advance upward mobility. It represents the willingness
of all kinds of citizens to work hard and to move on and move up and then
care for those who cannot do so for themselves as yet (or for some, maybe,
never). It takes money and vigilance to ensure that our competitive
capitalist system supports real economic progress, not just borderline
subsistence, for people at lower levels. This is where the constitutional
guarantee of the pursuit of happiness comes in. To read about the pursuit of happiness,
buy a copy of The
Greater Good. Be prepared that after you finish reading this book, you
may increase your charitable giving. Steve Hopkins, October 28, 2003 |
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ã 2003 Hopkins and Company, LLC The
recommendation rating for this book appeared in the November 2003
issue of Executive
Times URL
for this review: http://www.hopkinsandcompany.com/Books/The
Greater Good.htm For
Reprint Permission, Contact: Hopkins
& Company, LLC • 723 North Kenilworth Avenue • Oak Park, IL 60302 E-mail: books@hopkinsandcompany.com |
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