WWhen former Enron trader and billionaire hedge fund manager John Arnold and his wife Laura announced their intention to donate 5% of their net worth to charity each year, they perhaps expected a pat on the back. This does not happen.
Instead, philanthropy and income inequality experts criticized the gesture on social media and in MarketWatch, pointing out that the donation would barely dent the couple’s swollen $ 3.3 billion fortune. The Arnolds touted the pledge as a way to speed up giving to charity, but critics argued that without dramatically reducing their fortunes, the annual donation would likely have limited impact on the status quo.
“It’s commendable, but it’s just that they want to do it while preserving their wealth and power,” said Nia Wassink, nonprofit consultant and podcaster. MarketWatch, “and that is mutually exclusive for me.”
Chuck Collins, director of the Inequalities and the Common Good program at the Institute of Policy Studies, told the Daily Beast that he also applauds the Arnolds’ efforts to make an annual donation, but it doesn’t go far enough. . “If they want to impress those of us who don’t think that the growing wealth of billionaires is a good measure – and it is not a good measure for our society right now -[and] if the Arnolds want to be on the side of reducing inequality, then they’re going to have to dig deeper, ”Collins said.
The Arnolds’ engagement is part of the “Give While You Live” campaign, launched by the international nonprofit anti-poverty organization, Global Citizen, in coordination with Warren Buffett and Bill and Melinda Gates . The Arnolds declined to comment for this article, but David Hebert, head of communications at the couple’s philanthropic Arnold Ventures, told Market Watch that the campaign “ aims to encourage the world’s billionaires to do more when it comes to charitable giving and moving forward with meaning. emergency. The goal is to publicly commit billionaires to donate the majority of their wealth to nonprofit and charitable causes during their lifetimes, rather than after death.
It’s harder than it looks – in part because the assets of the ultra-rich are rising in value so quickly, just by sitting down. Based on their current net worth, the Arnolds would give around $ 165 million in their first year – which seems substantial. But as Wassink pointed out to MarketWatch, even with annual donations and assuming a 6% growth rate, the Arnolds’ wealth would grow another $ 974 million over the next 25 years.
A study released Thursday by the Institute for Policy Studies and Americans for Tax Fairness, which examined the wealth of billionaires over the past 31 years, found that the collective wealth of American billionaires had grown sufficiently in the past 13 months alone. to cover nearly 70% of the Bill for the U.S. Jobs Plan proposed by Joe Biden, which will cost $ 2.3 trillion over 10 years. Since the start of the pandemic, domestic billionaires have added some $ 1.62 trillion to their total fortunes.
On Monday, the report said, America’s 719 billionaires were worth a total of $ 4.56 trillion, more than four times the wealth held by the 165 million people who make up the bottom 50 percent of Americans. “It’s the absurdity of the billionaire wealth boom right now,” Collins said.
Benjamin Soskis, senior research associate at the Urban Institute’s Center on Nonprofits and Philanthropy, told The Daily Beast that the Arnolds’ announcement came at a time of internal consideration for philanthropy. As income inequality has skyrocketed in recent years, the mainstream has shifted away from handing out small sums of vast personal fortunes and turned to the active dismantling of the power imbalances that made these freebies possible. .
“If you’re a billionaire, you have all this power, and it’s fundamentally illegitimate,” Soskis said. “There is a fairly powerful criticism that, for the donation to be legitimate, it has to result in some diminishing of the donor’s status or power. This is what philanthropy should do: make sure that there are no longer huge disparities in wealth and power, slowly drain the funds that would allow you to be a philanthropist.
John Arnold first made the news in the financial industry as a young trader at Enron, where he earned the biggest employee bonus ever and the nickname “King of Natural Gas.” Arnold left the company before its catastrophic end, escaping all accusations of wrongdoing, to set up his own hedge fund. The company, Centaurus Advisors, then bought a 10% stake in the National Coal Corporation, before closing in 2012.
In 2010, three years after Arnold became America’s youngest billionaire, the couple formed the Laura and John Arnold Foundation, which was worth an additional $ 2 billion in 2019, and stepped up their philanthropy. They have focused some of their donations on efforts to reduce the costs of pharmaceutical drugs and reform the criminal justice system. They also funded more controversial measures – including a donation to the Baltimore Police Department’s aerial surveillance program, which was sued for invading the privacy of civilians in 2020 (a judge later ruled the program constitutional ).
The Arnolds gave more than the promised 5% of their wealth in previous years. In 2020, Forbes included them alongside George Soros and Warren Buffett on a list of billionaires who had given 20% of their wealth. At the same time, they have also drawn criticism for turning their foundation into a limited liability company, which requires less transparency about where their gifts go.
The Arnolds’ pledge to donate 5% of their net worth each year ties in with some of their other activists to reform philanthropic requirements. Last year, they joined with several other foundations to launch the Fast-Track Charitable Giving Initiative, which proposed a series of reforms to speed up the transfer of funds from donors to operating charities. As part of this initiative, they pushed to increase the mandatory annual disbursement for private foundations from 5% to 7% and to speed up the timelines for contributing funds advised by donors.
Like those efforts, Soskis said, the Give While You Live commitment reflects an increased awareness of the importance of speed when giving large sums of money. In previous versions of the Giving Pledge, participants could fulfill their pledge at death – wait decades to donate a lump sum per bequest.
“From a nonprofit perspective, this is not ideal,” Soskis said. “Nonprofits need funds right now, and [waiting] keeps the power in the hands of the donor and postpones the timing of the donation. So the new element of the Global Citizen campaign and the 5% Arnolds campaign is that it points to religious imperatives such as tithing, which requires you to make some sort of annual contribution. “
But with billionaires’ wealth growing as fast as ever, the gesture may not earn them much absolution. Laurie Styron, executive director of philanthropic watch group CharityWatch, told the Daily Beast that Americans have historically given 3% of their annual income to charity. But even as the rich’s share of wealth increases, the poor and middle classes donate a higher percentage of their income on average, although the rich are not tangibly affected by the loss of resources.
“I think that’s why the general public is less and less impressed with these types of pledges,” Styron said. “[They] have become the basic public expectation of the rich, instead of being seen as acts worthy of eternal gratitude and praise.
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