by Paul H. Rubin and Rod D. Martin
December 27, 2017
In this holiday season, we constantly see appeals to “give back.” Google indicates that there are 154 million mentions of “giving back.” While many of these are self-serving requests for contributions, a sampling of these listings indicates that giving to charity helps create a “purpose” in life. The assumption (sometimes explicit, but always implicit) is that what we do in the workplace to earn our money is somehow selfish, but we can help others by giving to charity.
I have no issue with charity; my wife and I are regular and faithful givers. But what is not socially useful is to call these or any other contributions “giving back.” The implication of the term is that the donor has taken something from society by earning money and that this has created an obligation to return something through charity.
This view of charity is very counterproductive and leads to the general demonization of markets which has become rife in our society. The act of creating wealth is itself productive. Short of theft (by individuals or by government), the only way to become wealthy is to create some good or service that others find valuable. The wealthy may contribute to social good by giving to charity, but before that, they created vastly more social good through the very behaviors that created their wealth: solving other people’s problems, meeting other people’s needs (and yes, wants).
However much good Bill Gates may do through his Foundation, those social benefits pale in comparison to his contribution through Microsoft and the computer revolution he helped to create. Mr. Gates was able to gather for himself only a small portion of these benefits; the overwhelming majority went to all the rest of us: Gates made all our lives immeasurably better through the products he created and which we purchased. Warren Buffett is a highly skilled investor: that means he created huge amounts of social wealth by allocating capital to its most efficient and productive use. In an earlier era, John D. Rockefeller made his money by rationalizing the production and distribution of petroleum, first for kerosene lighting and then for automobiles. He literally brought light to the world, and made life beyond Little House on the Prairie levels possible.
The Ugly Side of Charity
Henry Ford, a vicious anti-Semite, nonetheless created huge amounts of social wealth (which also benefited Jews) by developing methods of producing automobiles at a cost low enough for almost everyone. When Henry Ford “gave back”, he did far less good: in fact, he “gave back” in part by publishing an anti-Semitic newsletter, the Dearborn Independent, and contributing to other hateful causes. Hitler borrowed heavily from Ford’s newspaper.
But even if he’d given to better causes, could his giving have done as much good in the world as did his creativity and productive work? It’s a good question to ask yourself the next time you need a fire truck, or an ambulance, and a good road on which for it to race you to the hospital, rather than a horse, a wagon and a dirt path.
Producing wealth requires that we benefit people by satisfying their needs, their desires, their hopes and their dreams. There are certainly ways of making money in a free economy that are wicked, but they’re relatively few compared to the whole. By contrast, in “giving back”, it is at least as easy to do harm as good, depending on the targets of giving. For example, the Koch Brothers and George Soros both “give back” by contributing large sums to political action, but it is impossible that they are both contributing to social good since the causes they advocate are diametrically opposed.
Giving to charity is meritorious, and we should most certainly encourage it, both for its hoped-for benefits to society and for its encouragement of a generous spirit in the giver. But the benefits of charity are secondary to the benefits created by earning the wealth that can be contributed. Charity is unsustainable without profit; but even more important, from growing more food to providing better retirement conditions to lighting the world’s homes and schools, the things we do daily in our working lives solve real-world problems far greater than mere charity could ever address.
We should not demean wealth creation. Wealth creation has taken us from a primitive world to the edges of space in barely more than two short centuries. And even were that not true, no one can “give back” a penny more than they have to give.
— A slightly different version of Creating Wealth Does More Good than Giving it Back originally appeared at Economics 21 and FEE.org.