Preview: In this issue of Imprimis, based on a lecture delivered at the 20th annual Ludwig von Mises Lecture Series in April 1993, Hillsdale College President George Roche contrasts the brutal reality of communism with its idealistic promises and false claims about human nature. In so doing, he makes the moral case for the free market and examines how all members of society prosper when individuals are left to make their own decisions. He concludes, “Free men know what tyrants never learn, that the ultimate economic resource is the mind and energy of a free person.”
Throughout history, most of the world has thought of giving and self-sacrifice as a means of earning something in return. But the Judeo-Christian tradition views giving and self-sacrifice as a voluntary reflection of God’s benevolent nature in whose image we were created. Giving of ourselves and our resources is being what we were created to be.
Millions of Americans believe this to be true. We are the most giving nation on earth. There is no tradition of benevolence that can compare in Asia, Latin America, Africa, or even Europe. Nowhere in the world is there a United Way or a Cancer Society like ours. No other nation supports missionaries to the same extent, and none can compare with America in support for private, independent education. In many countries, congregations do not even pass the offering plate. Mandatory church taxes pay for everything, from the priest, the organist, the choir, and the ushers to the heat, water, and electricity. They are the most lifeless churches you have ever entered.
When everything is taken care of by government, the spirit of voluntary commitment is lost. In contrast, it is our Judeo-Christian heritage that has inspired our giving. Americans donate about $100 billion to charity each year, mostly in the form of individual contributions. Remarkably, poor Americans give a higher percentage of their incomes than do their more affluent neighbors. Corporate America currently gives $5 billion, or five percent, of all charitable giving each year. This is a relatively new source of philanthropy, begun during World War I, when corporations were urged to declare “Red Cross Dividends.” These were paid with after-tax dollars; they were not considered legitimate business expenses by the IRS. Nonetheless, many businesses went along. During the Depression, other charities like Community Chest and United Way adopted the idea. But not until 1936 did the IRS declare that a charitable contribution could be a deductible business expense, and even then it had to directly benefit the business. This ruling actually allowed management to circumvent shareholders in making the decision to contribute. Then in 1953 a gift to Princeton University triggered a court battle that led the IRS to allow gifts to any organization without regard to the best interests of the business. The only limit, which is still in effect today, stipulated that gifts must be no more than five percent of a corporation’s pre-tax earnings. Very few corporations give the maximum.
There are plenty of people who will tell you that five percent is not enough. But we ought not ask whether the corporate community “does its fair share.” We ought, rather, to ask: “What is corporate responsibility?” This is a question that goes to the nature of business itself. Very simply, a business sells goods and/or services to people who want them. By law, a business corporation is authorized to act in place of a person, even though it may be owned by many. The profits belong to all who invest in expectation of earning a return, so shouldn’t the profits of a corporation be reserved for the benefit of the owners?
Of course, the owners have a duty and obligation to consider how they will dispose of their profits. The matter is simple in a proprietorship or partnership with a small number of owners: The parties may meet and choose to give to worthy causes. It gets more complicated in the case of a so-called public company, which may have thousands of shareholders. How can all be consulted on the disposition of the profits? I think the solution is very simple: pay out the profits as dividends and let the owners decide what to do with the money.
But in recent years corporations have learned from politicians to become very skilled at giving away other people’s money while making themselves feel good about it. Many arguments are raised to justify corporate giving. One of them is genuine altruism. People are moved by pure motives to contribute, and that is commendable. A second argument is that the needs are so great that they require corporate rather than individual resources. A third justification is that giving creates goodwill in the community. This view is based on the idea that it is important for corporations to be good citizens and to contribute to the community. (It sounds appealing until one realizes that it is possible to give back to the community simply by lowering prices.)
The current buzzword in corporate giving is “enlightened self-interest.” If you make the world a better place, people will buy more of what you have to sell. Enlightened self-interest also creates good public relations. Whole textbooks have been written on this kind of “cause-related marketing.” Huge P.R. departments create photo opportunities for corporate heads to shake hands with the leaders of local charities and to hand them checks. The results of this kind of philanthropy are measured by the good it does for the company, not the good it does for the recipient.
There is also a great deal of peer pressure to conform in the corporate world. If a worthy cause is in need and most of the community is giving to that organization, a company becomes conspicuous by its absence. And corporate philanthropy can help avoid trouble. Dozens of special interest groups routinely target corporations and issue the threat of a boycott in order to secure contributions. Often these contributions are in reality just like “protection money” businesses are forced to pay to the underworld.
Corporate philanthropy has also funded hundreds of legitimate causes meant to solve our nation’s problems. But the poor seem to get poorer, the plight of the inner city has grown, and many citizens have become more and more dependent upon the federal government. Corporate philanthropy has helped foster that dependence. In the Capital Research Center’s Patterns of Corporate Philanthropy the philanthropic contributions of the top 250 corporations in the country are graded. Gifts to a conservative organization merit an “A.” Contributions to a non-ideological group are awarded a “C,” while benefactions to leftist/liberal causes earn a “D” or an “F.” The scores for each company are then averaged. Since the book was first published in 1986, there has not been a single top corporation with a record of giving that deserved an “A” rating. Only 13 percent in the last study had a “B”; 24 percent had a “C”; 52 percent had a “D”; 11 percent had an “F.” I question the motives and values of companies that give shareholder profits to organizations that encourage further dependency on government. Is this “enlightened self-interest”?
It is also clear that corporate philanthropy has been a poor substitute for personal philanthropy. It has not only been widely perverted by businesses and special interest groups, but it has not been very effective in addressing the problems it seeks to solve. In this context, it is more important than ever that we develop guidelines for personal philanthropy.
Here are the guidelines I would suggest:
- Giving is an individual opportunity to reflect the benevolent nature of a loving God. Give so that you might become the person you were created to be.
- Support people and causes with which you are personally involved. Give more than just money to those you are helping; stand with them and help them personally.
- The Bible says that the measure you use to give, whether large or small, will be used to measure what is given back to you. It is important to consider the biblical tithe as an appropriate standard. It does not have to be 10 percent, but it should be a specific amount you set aside as soon as you receive your paycheck.
- Do not wait until you are established in the world; you will never be established in the world. You will never reach a point at which you have “arrived” and can begin giving.
- Give privately, not seeking recognition for your work; it is for others’ benefit, not your own, that you are giving.
- Be a cheerful giver. The joy of helping others far exceeds the joy of helping yourself.