The second richest man on earth, investor Warren Buffett, made headlines last week with his plan to give away $37 billion of his $44 billion fortune to charities. The main beneficiary will be the richest man on earth, Bill Gates, who will put the money in his Bill & Melinda Gates Foundation. Though its assets will not grow significantly as a direct result of the gift, the Gates Foundation will be able to spend $3 billion annually, making it by far the world's largest private philanthropic organisation.
|Warren Buffett with Melinda and Bill Gates|
Buffett announced his gift in the New York Public Library, itself the product of collaboration between early philanthropists, including the famous Andrew Carnegie. Apart from the 90-year-old David Rockefeller, grandson of the notorious philanthropist oil baron John D. Rockefeller, Bill Gates himself was the prominent figure shaking hands with the second most successful capitalist on the planet. A few weeks earlier, Gates had decided to give up his daily duties at his company Microsoft by 2008 to spend more time at his foundation. Thus, we had the spectacle of the two richest men on earth talking about "giving back" to society.
The New York Times wrote:
"Warren Buffett's $31 billion gift to the Bill & Melinda Gates Foundation will only deepen the foundation's commitment to fighting global diseases and improving American education, Bill Gates said Monday.
"The foundation hopes to use the enormous gift, among other things, to find a vaccine for AIDS, both Bill and Melinda Gates said.
"And Bill Gates went further, saying that while he may be ‘overly optimistic,' he felt that they had a real shot at finding cures for the top 20 infectious diseases in the world, as well as ensuring that every American has a chance at a decent education.
"‘Can that happen in our lifetime?' Gates said, sitting next to Buffett at the New York Public Library, where the gift was formally announced. ‘I'll be optimistic and say absolutely.'" (June 26, 2006)
The media internationally were quick to praise the generosity of Mr Buffett and point out the possibilities opening up for millions of people in desperate need of vaccination for diseases like tuberculosis and malaria that should have been eradicated long time ago. Some may say, is it not pedantic to once again point the finger to the super rich and say "this is not enough"?
Marxists do, however, have the annoying habit of looking at problems as a whole, to analyse them from all angles and only then to move on to a definitive judgment. We are talking about global problems here that unfortunately have been around for a very long time. Hence, we cannot but ask some pertinent questions. How did these billionaires earn their money in the first place? Why is it that they do not know what to do with their wealth while ordinary working men and women find it hard to pay their bills at the end of the month and while more than a billion people live on less than a dollar a day and 3 billion on less than 2 dollars a day?
Warren Buffett, the human face of capitalism?
Let's start with the first question. We already dealt with Bill Gates' accumulation of wealth in a separate article (see: Bill Gates, saviour of the world?) and tried to show that far from pushing the best product on the market, Gates's brainchild Microsoft did not grow through "innovation" but through a whole series of predatory tactics and with a great deal of cash and marketing campaigns behind it.
To be fair, Warren Buffett is no Carnegie, the infamous billionaire philanthropist who wasn't afraid of breaking strikes. In fact, Buffett is much more liberal in his views than the average money hungry capitalist. In 2003, for example, he wrote an opinion piece for the Washington Post where he opposed further tax cuts on dividends, which he said would "further tilt the tax scales toward the rich". Not so long ago he criticised the White House and opposed George W. Bush's income tax cuts favouring the wealthy. "If class warfare is being waged in America", he wrote, "my class is clearly winning". Furthermore, in an interview with Fortune magazine he said: "I would argue that when your kids have all the advantages anyway, in terms of how they grow up... it's neither right nor rational to be flooding them with money."
Here speaks a well-educated man who realises he would ruin the future of his own children if he spoilt them with money. Even billionaires have come to realise that vast unearned wealth is a recipe for a psychological wreck. Buffett also seems aware of the utter discrepancy between his fabulous wealth and the sorry state of the rest of the world, hence his gesture of giving away the bulk of his fortune to philanthropy.
That is not the point, however. Whether he or Bill Gates is completely honest about his intentions and goals - we think it is a combination of naivety and image building - does not really matter. The most successful capitalists, especially multi-billionaires, who do not have to worry too much about competitors, can undoubtedly afford (literally, that is) to have a more relaxed attitude towards the world in general. It is much easier to give away your wealth when you are at the very top than when you are trying to catch up with bigger fish in the sea.
In judging people like Gates and Buffett we cannot adopt an abstract moral point of view and be led by the immediate stream of events. Yes, no sane person would object to more money being invested in medical research and schools. Though there have been some criticisms of the Bill and Melissa Gates Foundation relating to its priorities - the United Nations pointed out that a safe and inexpensive (measles) vaccine has been available for over 40 years and yet about a third of all children are still unprotected - we are the last ones to oppose helping people on the ground.
However, there are some glaring contradictions in this fairy tale. Unlike Bill Gates, Warren Buffet is not a monopolist, or, like the typical American 20th century philanthropists, a robber baron. He has built his wealth by being the world's most successful investor. And here we get to the point: it is impossible to become a billionaire with clean hands. No matter how much the media adulate Buffett's "civilised" approach, because of his economic role in society he acts like any other self-respecting capitalist: he takes over as many businesses as he can, cuts costs to the bone and lays off workers if that is what it takes to increase his rate of profit.
Cutting jobs was something Buffett started to do early in his career. In 1962, at the age of 32, he acquired Dempster, a windmill manufacturing company, and with the assistance of some co-managers he laid off workers. That same year he bought shares in Berkshire Hathaway, a textile manufacturing firm, which proved to be the key to his success. One year later, Buffett sold Dempster for three times the amount he had invested in it. In 1965, he took full control of the Berkshire Hathaway board. From then on the company was to be his milch cow generating large amounts of capital.
Money does not grow on trees. Real money can only come from extracting profit out of the labour of others, i.e. by exploiting someone. In this sense Buffett has always played by the rules of the capitalist game, whether in the field of merging and acquiring companies - a very profitable affair as long as you have enough financial resources to go down this road - or in making sure of getting a greater return on investment. Hence, his moves over the years have been extremely rational from a business point of view.
The billionaire may at times come across as having concern for his workers, but in the final analysis his role is to increase the value of Berkshire Hathaway in order to keep the shareholders happy. If this means shutting down certain branches of the company, as he did in 1985 in Massachusetts, then that is what has to be done. Buffett managed to remain competitive on the market precisely through cuts such as this, but it meant that from one day to the next hundreds of workers were left without a job. In 2004, Fruit of the Loom, owned by Berkshire, closed down its underwear manufacturing plant in Cameron County, Texas, thereby getting rid of 800 jobs in an area with an already high level of unemployment and with a poverty rate above 30 percent.
Growing gap between rich and poor
Thus we see that behind the mask of a great philanthropist is hidden the ugly face of an ordinary (or extraordinary, depending on which side you are on) asset stripper. One might object that this is just how the system works and that Buffett is only doing whatever he can from his standpoint. But that is exactly the point. Investors like him are bound by laws that inherently depend on the exploitation of one human by another. No personal character trait or any amount of charity or philanthropy can change the fundamental inequality which capitalism generates.
Giving away money for the benefit of others is based firstly on having money, which for the capitalist in turn can only come from labour in the form of surplus value. Philanthropy on the scale we see now can only exist in a fundamentally unequal society where a small minority of businessmen owns or controls large parts of the productive forces entitling them to staggering profits. Since capitalism these days has become so parasitic, with finance capital dominating the world economy, capitalists do not even have to invest in these very productive forces any more. For investors it has become much more profitable to behave like a parasite: take over existing companies, strip down their assets and merge them with other companies. In that process more and more capital is accumulated that is concentrated in fewer and fewer hands like those of Warren Buffett and Bill Gates.
Huge profits are one side of the coin; increasing poverty is the other. In the United States itself the official poverty rate in 2004 was 12.7 percent of the population, up from 12.5 percent in 2003. That represents a total of 37 million people, 1.1 million more than in 2003, and 5.4 million more than in 2000. The poverty rate for Blacks and Hispanics is roughly double that for non-Hispanic Whites and Asians, although non-Hispanic Whites are joining the ranks of the impoverished more rapidly than any other group. The poverty rate is also higher among those under 18 years of age at 17.8 percent, which represents 13 million children. (As reported in the Annual Social and Economic Supplement of the Current Population Survey, see US Perspectives 2006 - The U.S. Economy).
In a recent article in The Observer (June 8, 2006), Paul Harris had this to say:
"Over the past few decades there has been a fundamental shift in the structure of the American economy. The gap between rich and poor has widened and widened. As it does so, the ability to cross that gap gets smaller and smaller. This is far from business as usual but there seems little chance of it stopping, not least because it appears to be government policy.
"Over the past 25 years the median US family income has gone up 18 per cent. For the top one per cent, however, it has gone up 200 per cent. A quarter of a century ago the top fifth of Americans had an average income 6.7 times that of the bottom fifth. Now it is 9.8 times.
"Inequalities have grown worse in different regions. In California, home to both Beverly Hills and the gang-ridden slums of Compton, incomes for lower class families have fallen by four per cent since 1969. For upper class families they have risen 41 per cent."
This growing gap between rich and poor is confirmed by the staunchest defenders of the capitalist system themselves, The Economist:
"Thanks to a jump in productivity growth after 1995, America's economy has outpaced other rich countries' for a decade. Its workers now produce over 30% more each hour they work than ten years ago. In the late 1990s everybody shared in this boom. Though incomes were rising fastest at the top, all workers' wages far outpaced inflation.
"But after 2000 something changed. The pace of productivity growth has been rising again, but now it seems to be lifting fewer boats. After you adjust for inflation, the wages of the typical American worker - the one at the very middle of the income distribution - have risen less than 1% since 2000. In the previous five years, they rose over 6%. If you take into account the value of employee benefits, such as health care, the contrast is a little less stark. But, whatever the measure, it seems clear that only the most skilled workers have seen their pay packets swell much in the current economic expansion. The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits have reached record levels as a share of GDP." (Inequality in America. The rich, the poor and the growing gap between them, June 15, 2006)
And it concludes with this frank statement:
"All in all, America's income distribution is likely to continue the trends of the recent past. While those at the top will go on drawing huge salaries, those in the broad middle of the middle class will see their incomes churned."
Thus, in the developed capitalist world itself there is a growing polarisation between the classes, which is only a reflection of the wealth gap between the so-called "rich" and "poor" countries, the latter in reality also being split in between classes.
Charity or self-emancipation
The problems of the deprived impoverished masses cannot be solved by charity and patronage. There is no solution to their problems other than their emancipation from the poverty and deprivation itself as a whole. The harsh reality is that the sufferings and hardships of humankind are spreading at such a rapid pace and deepening with such brutal intensity that even if all the charity trusts in the world multiply by hundreds they could still not tackle the sufferings and pains of humanity.
All the misery worldwide simply cannot be dealt with by an economic system that is responsible for this inherently unequal world which makes a small percentage of the people fabulously rich and throws an overwhelming majority into poverty and despair. The anarchistic economic system based on the exploitation of man by man also known as capitalism, which is based on the premise that it is necessary to make as much money as possible in whatever way possible, can only come up with temporary and very limited patchwork answers in the form of charities and philanthropy, precisely because it is itself directly responsible for the enormous wealth gap and all the poverty in the world.
The good intentions and personal qualities of this or that philanthropist hardly matter in this respect as they are merely pawns in a system they cannot even control themselves. At the end of the day figures like Buffett have been one of the human instruments in the process of destroying well-paid jobs and cutting social gains of the past which has been taking place with increasing intensity over the last years. These wealthy modern-day philanthropists are precisely the ones who define the laws of the present system pushing more than a third of humanity below the poverty line.
The world should not rely on the good will of a few billionaires investing their private capital in building schools and providing healthcare. Apart from the fact that this is in effect fundamentally undemocratic - who elected these people, who do they represent, how are they accountable? - the recent wave of philanthropy is above all a condemnation of the various governments all over the world who are unable to provide their own people with the basic facilities to lead a truly dignified and enjoyable human life. Charity steps in where government policy fails. But just as a small patch cannot treat a festering wound, let alone an amputated leg, it is time to see through the limits of headline grabbing initiatives like the Bill and Melissa Gates Foundation.
What is needed is to take control over the economy so that we can start allocating resources to where they are really needed. Billions of workers all over the world have never created so much wealth in the whole history of humankind. The tragedy is that in the capitalist system the bulk of this wealth inevitably ends up in the pockets of a small minority instead of being used for the benefit of the majority. That in turn means getting organised from the bottom up and fighting for a socialist world that is not subject to blind market forces destroying the planet and its inhabitants. (And that will be the best vaccine ever made.)
- Globalisation and Imperialism by Mick Brooks (April 11, 2006)
- Bill Gates, saviour of the world? by Maarten Vanheuverswyn (March 17, 2005)
- Globalisation and empire by Michael Roberts (December 7, 2005)
- The Shackles of Imperialism – Third World Debt by Rob Lyon (February 14, 2005)
- One billion children in extreme poverty: a holocaust on a world-scale by Maarten Vanheuverswyn (December 10, 2004)