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Philanthropy And The Free Market


One of the most popular criticisms of capitalism is that private charity would be insufficient in the absence of a government. Libertarians have always responded to this saying that it is the production of wealth which makes charity possible, and there would be far more philanthropy under capitalism. I suspect that much of the confusion stems from the belief that libertarians have an “atomistic” view of the individual. This is of course, a naive and idiotic view.

As Sandy Ikeda writes In a Freeman article:

“Strange that some would think that voluntarism wouldn’t thrive in a social order that is all about voluntary action and non-aggression. Perhaps that’s because many, including too many libertarians, believe the libertarian credo is, “Don’t tread on me!” Instead, I think it comes closer to the truth to say, “Don’t tread on others!”  

This is an important distinction. Libertarianism is not merely an extension of the view, “Let no man take what is mine.” into the political sphere. Libertarians look down on violation of individual rights in general. But, I think libertarians are making a substantive mistake when they grant philanthropy more importance than it is warranted. The arguments people raise against capitalism are a clue to their character. I can imagine why anti-capitalists think that private charity would be insufficient. But, I do not know why libertarians even take this argument seriously. The modern capitalistic democracies in the west do not let the weak perish. Under capitalism, everyone would be living in an infinitely more affluent society. The market is by no means a panacea for all human evils. A free market would have its own set of problems, but a shortage of philanthropic institutions would not be one among them.

Think about this. At present, much of philanthropy is wasteful signaling. Deep inside, the people who donate to charity know that they are probably wasting much of their money on popular causes like universal education and health care. The signalling model of education and studies in health policy suggest that much of schooling and medical care is wasteful. But, this does not deter the philanthropists. Many philanthropic foundations do far more harm than good by nudging public policy toward paternalism. The government too, of course, nudges the wealthy into donating to popular causes that make them look good, without really doing good.  

It is possible to argue that philanthropists are not competent social scientists, and do not know that their contributions are wasteful. I am not buying that. If many philanthropists are willing to spend a significant fraction of their personal income on something that yields little value before thinking long and hard, they probably have an independent motive to do so. The desire and willingness to do philanthropy is perhaps a virtue, but this is not a rare virtue. There are enough such men to go around. Intelligent philanthropy is rare because rationality is a much rarer virtue. There are not many philanthropists who are willing to calmly listen to the best social scientists. So, if the anti-capitalists really care for the needy, what should bother them is not that the wealthy does not contribute, but that they do not contribute in a meaningful way. But, we rarely hear this argument. Why?

More importantly, I do not know why libertarians even take this argument at face value. If the anti-capitalists genuinely care for the welfare of the poor, they would find third world poverty more tragic than poverty in the developed world. But, few anti-capitalists advocate open borders. It is easy to nearly eliminate poverty by merely recognizing the rights of the poorest people on the earth. Even most philanthropy in wealthier societies is directed at the relatively poor within the country. If this is true, what bothers them is, perhaps, something else. By arguing that the weak would perish under capitalism, they are sending libertarians on a wild goose chase. Anti-capitalists are like the partner who annoys you without really telling you what really bothers her. 

More importantly, most libertarians unquestioningly accept the view that helping our fellow human beings is a great virtue. It is not clear why this is self-evident. Instead of dismissing this as a malicious thought, I think everyone should consider counter-arguments with an open mind. Some estimates suggest that nearly 262 million people were murdered by the various governments in the twentieth century. This is a significant fraction of the world population. It is hard to deny that extreme cruelty is not rare. But, murder is an extremely cruel act. If 262 million people can die under various governments, why is it improbable a lot many more had suffered cruelty of a less serious nature? This is not merely a speculation. Abuse and cruelty is very much the norm.

Anyone can easily think of acts of cruelty which almost everyone endured, thinking them to be a normal part of human life. Corporal punishment, bullying at school, passive aggression in relationships, and coalition politics inside offices are obvious candidates. A large majority of the people on the earth do perpetrate such abuses. Now, is it obvious that strangers deserve your help, irrespective of their moral character? Hardly. I do not intend this as a blanket attack on charity. But, if people recognize that most people on the earth do not deserve their help, they would be more willing to re-consider their support for welfare. They would be far less willing to oppose capitalism on the grounds that private charity would be insufficient to eliminate poverty.

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