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A wealth of cheapskates

It may sound like the super-rich are giving away a fortune. But they're actually hoarding a lot more.

March 18, 2007|Gregg Easterbrook | Gregg Easterbrook is a fellow of the Brookings Institution. His recent books are "The Progress Paradox" and a novel, "The Here and Now."

THERE ARE NOW 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% of Americans has more than doubled in the last quarter of a century, while that of the bottom fifth barely budged. The rich, in short, are getting steadily richer, both 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'd 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 healthcare 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% of their money, on average. Sounds magnanimous, until you consider that the Dow Jones industrial average rose 16% 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 just over 1%. Numbers from the philanthropy watch organization Giving USA show that Americans as a whole annually give away about 0.5% 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% of his fortune. Software magnate Lawrence Ellison, net worth $20 billion, gave away $100 million -- half of 1%. Pierre Omidyar, founder of EBay, net worth $7.7 billion, gave away $67 million -- less than 1%. Nike tycoon Philip Knight, net worth $7.9 billion, gave away $105 million -- slightly more than 1%.

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. Financier George Soros, net worth $8.5 billion, in 2006 gave away $60 million, which sounds like a lot until you reflect that it is less than 1%. Soros rails against the inequities of capitalism. Yet when it comes to his own disproportionate stash, that's another story.

Bill Gates, one of history's richest men, has so far 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. This means Bill and Melinda Gates have kept for themselves twice as much as they offered to others.

For the average person to keep much more than he or she gives is understandable; for the super-rich, it's a different matter. The $53 billion that Gates keeps for himself is money he could not possibly spend even by buying entire islands; it exceeds the gross domestic product of Costa Rica.

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%, according to Carnegie Corp. figures. Suppose Gates followed suit: He would have to give away an additional $36 billion and go from being the world's richest man to exceeding Buffett as the world's greatest benefactor -- and he would still have $17 billion. Conservatively invested, $17 billion would yield, after taxes, about $700 million a year for life. So Gates could show history-making generosity and still remain richer than Croesus. Instead, it's mine, mine, mine.

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