Government functions

'Philanthropy' – State vs. Private


The proper scope of state activity is a matter of constant controversy. A number of people (including me) believe in small government – that means, to the greatest extent possible, reducing the size of the state apparatus, curtailing the reach of the bureaucracy, and restricting the powers of this or that public agency. Individual liberty is threatened whenever a state forces citizens to take steps they would not be willing to take on their own.

Such a vision of limited government lacks popularity among a large segment of the Georgian population. Many people believe that a state must have broader functions – be it supporting development of the economic sector (for example, government support of agriculture is very popular in Georgia), coordinating sports or “youth affairs” or “culture,” or taking care of employing young people (which is absurd in economic terms).

Expansive government is, of course, not unique to Georgia. It is a popular concept among more advanced Western countries too. That is not difficult to fathom: People prefer having their problems solved at taxpayer expense (that is what using the state as “an instrument” means) and, congruently, governments gain political dividends by playing the role of “caring father.” Big government undertakes that public caregiver role with great enthusiasm – and just as enthusiastically spends taxpayer money on public caregiving. The result is that football coaches ask for more public monies to restore the past glory of football teams; “representatives of culture” make the same demand to ensure that culture flourishes; rural inhabitants want larger subsidies to revive agriculture; the “Georgian nation” insists on higher funding to save the Georgian language, while the Patriarchate presses its own demand to preserve religious belief. In Georgia, this problem is further aggravated by the harmful Soviet legacy of a “strong union of brethren” performing every function and every role.

One function which such brethren impose on the state as an obligation is philanthropy. Their narrative is rather simple: People are egoists while the market is imperfect; consequently, without state largess, the rich will become richer, the poor will become poorer, so-called social Darwinism will gain the upper hand, and the extremely vulnerable will all die of starvation. There is also another evolutionary scenario: the extremely disadvantaged will increase in number, rebel and install a dictatorship of the formerly downtrodden. But I will not dwell here on such extreme scenarios. The focus of this article is philanthropy as a function of the state.

Philanthropy as an expression of human compassion and/or solidarity can only be practiced voluntarily. In other words, philanthropy requires both parties involved to act according to their own free will. If the party providing assistance is forced to do so, that cannot be considered philanthropy. When the state engages in “philanthropy," it takes taxes from all citizens and then, based on the preferences of a handful of bureaucrats, “assists” select groups considered suitable (politically advantageous) to receive that help. Clearly, that can hardly be called philanthropy.

A separate issue is the extent to which the state is capable of assisting everyone needing assistance. Here, it does not matter what state we are talking about because the definitions of “poor” and “extremely vulnerable” lack precision just about everywhere. No wonder then that decisions about who should receive assistance and in what amount are arbitrary. In the case of state assistance, the decisive factor is usually the size of the recipient audience (electoral resource). It is no coincidence that the instinct of philanthropy is awakened in the state during the run up to elections. Garnering political dividends for each act of charity naturally requires the help of media, regardless of how self-serving all that looks on TV.

One argument regularly used to justify state “philanthropy” is the lack of any sense of solidarity among the Georgian society – as if citizens of Georgia really don’t care about the fate of their compatriots or are so poor that they lack resources needed to care for others. No one argues that, in terms of economic development, Georgia still lags far behind the desired level. But it is patently absurd to use that level of economic development to support the claim that sense of solidarity is lower here than in other countries. There is no evidence of any sort to prove that supposition. Even if such evidence did exist, it would merely beg the question of whether state (instead of private) philanthropy would increase our sense of solidarity. More likely, it would have quite the reverse effect.

Compassion is an individual feeling. Only a person can have that. A state or a ministry cannot “feel” any compassion at all. Nor can a person delegate compassion to a state worker hired to dole out public assistance. In reality, state philanthropy perverts the natural instincts of people and severs traditional social ties. Instead of thinking about assisting others (which is a normal human feeling), people regard that as a state function, as the responsibility of the state and not an individual concern. Recipients, on the other hand, become increasingly dependent on the public bureaucracy and maintain increasingly fewer connections with family members, friends and neighbors.

The greatest shortcoming of state assistance programs is the lack of mechanisms of responsibility. When private persons donate their own money to charitable organizations, they track where and how efficiently that money is spent. Assistance givers are motivated to monitor charitable fund activity to prevent the waste of resources they earned through their labor. If private donors do not see expected results from the assistance provided, they will no longer donate to that fund and will find another charitable organization to perform the job better. Charitable foundations thus find themselves in a competitive environment, which pushes them to operate in more and more effective ways.

Conversely, when a state practices charity, it is impossible to determine with any degree of certitude the efficiency of this or that assistance program. Any questions that arise in relation to state assistance programs are met by the state bureaucracy with new and more sophisticated assistance program requiring ever-larger public expenditures. And so it goes on perpetually and pointlessly. The administration of each and every state assistance program requires “charitable” funds to maintain public structures. In other words, charity begins at home; state money ostensibly allocated to help disadvantaged people is actually spent on public servants’ salaries, retraining, business trips, and so on and so forth.

Philanthropy necessarily requires the preservation of private property. The more private property is protected by the state, the more people in that state will, on their own initiative, help others. The logic here is simple – when everything belongs to the state (i.e. to no one), individual people cannot assist others. That is why the amount spent on charity is much less in socialist countries than in free countries. Similarly smaller amounts are spent on charity in countries with economies mainly built on free market principles but with a high level of wealth redistribution by the state. The reason in both cases is the same – citizens are left with no disposable assets to donate to charity.

The example of the United States is often cited in discussions about the superiority of the free market over a centrally planned economy. Interestingly, the United States is also a good example demonstrating how free market principles affect philanthropy. Every year, the nongovernmental Giving USA Foundation publishes “Giving USA, the Annual Report on Philanthropy.” According to the 2011 report:

• In 2009, when the global financial and economic crisis reached its peak, Americans spent USD 291 billion on charity;

• In 2010, charitable donations in the United States reached USD 291 billion, of which USD 212 billion was donated by private persons;

• In 2010, recipients of thirty-five percent of all donations were religious organizations, which are in the vanguard of philanthropic activity. Various educational institutions received USD 42 billion in donations during that same period;

• Also in 2010, approximately USD 44 billion (fifteen percent of all donations) was given to support Haitian relief and recovery efforts in the aftermath of the January 2010 earthquake that devastated Haiti. That amount, virtually all from private donations, exceeded amounts donated by other countries to that cause;

• Some one million charitable organizations operating in the United States collectively raised nearly USD 1.5 trillion in revenues during the 2010 calendar year. That amount is higher than the total amount of income tax revenues collected that year by the U.S. government;

• Lutheran Services in America, an alliance of health and human services organizations engaged in philanthropy, receives almost USD 17 billion in donations annually. If this organization were included in the list of the world's 500 largest companies, it would rank 152;

• One-quarter of all charitable donations come from ten percent of the richest people in the United States;

• Each American family donates USD 2,000, on average, to charity each year;

• On average, an American spends as much on charity as three French, seven Germans or fourteen Italians;

• Traditionally, American conservatives who champion free market principles and small government spend much more on philanthropy than so-called progressives who support assistance programs implemented by the state with taxpayer money.


This article first appeared in Tabula Georgian Issue # 97, published 23 April 2012.



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