Warren Buffet and Bill Gates -- two of the world’s richest men -- recently came to India and exhorted Indian businessmen to follow them in pledging 50 per cent of their wealth in charity. Recently Ratan Tata, in an interview to British press, criticised Mukesh Ambani for building their 27-floor super-luxury residence in Mumbai warning that this is the sort of thing revolutions are made of. In a sense, he too was speaking against conspicuous consumption and in favour of giving back to society.
No businessman in India has actually followed Buffet and Gates by pledging anything along the lines suggested by them. But that does not necessarily mean that they are less interested in the welfare of their less fortunate brethren. In fact, historically there have been many different models (and motivations) of giving and new models are appearing all the time as a result of changes in society and technology.
In India where poverty is much more widespread within known circles (than distant as in many western societies), quite often people help their less fortunate relatives and neighbours in trouble whom they know personally. Also, the blind singer or the monk from a charitable organisation may appear at the door and routinely collect a small contribution. These acts of giving are not publicised, unlike the high-profile initiatives of people like Bill Gates.
The rate of inheritance tax may also act as an inducement. If the inheritance is taxed at a high rate, some rich people may prefer to give away a part of their wealth in charity to their preferred causes, achieving recognition and satisfaction during their own life time, instead of giving it in taxes to the government after their death. They may not also like the way the government would spend the tax revenue from their hard-earned money. On the other hand, with zero inheritance tax (as in India) first generation rich people may like to bequeath their wealth to the next, continuing to build their industrial empire and may think of giving at a later stage. Some may also feel that by successfully running businesses and creating productive jobs they are helping society more than by giving money in charity.
In addition to the traditional CSR (corporate social responsibility) projects where companies spend money to benefit neighbouring areas/communities, new models have emerged like, say, one cent or 50 paise of the sale price will go to a known charity. By engaging in philanthropy and projecting a more socially responsible image, companies try to differentiate themselves from others and hope to increase sales and profits.
This is not to suggest that all acts of charity come out of purely selfish motives. As a matter of fact, we all have conflicting emotions of selfishness and selflessness. This is true of individuals, businesses and nations.
In earlier days, religion used to play a much bigger role in philanthropy. Churches, temples and mosques regularly collected small (and sometimes large, depending on the contributor’s ability to pay) amounts from a large number of devotees. Many philanthropic activities (like feeding the poor, relief in natural calamities, providing education and medical services) were financed from these funds. Even today high-profile religious trusts with enormous money collected from devotees exist and flourish. But unfortunately, some of these have become primarily money-making institutions which help their promoters live a life of luxury with the help of tax-free money, though they also do some social work by running schools, hospitals etc.
NGOs are becoming more powerful and visible as vehicles for promoting various social causes. Some have joined the movement due to genuine concern for the underprivileged and are making personal sacrifices in various ways like giving up lucrative jobs. For some others – specially some fashionable people from well-connected families -- it is a profitable venture which also gives them a good feeling, social recognition and media attention. Because of their better connections it is also easier for such people to find rich donors abroad who are willing to provide a steady stream of contributions to the NGO.
Social business
Then we have the social business model which explicitly goes for (low) profit while serving the poor. Bangladeshi Grameen Bank microcredit model falls in this category. Another interesting example is the case where the big multinational food company Dannon agreed to sell special nutrient-rich yogurt to undernourished Bangladeshi kids at minimal profit. Dannon got good publicity helping the underprivileged. As part of the bargain, Dannon was permitted to sell other food products (like high-end cookies) at high profit margins in Bangladesh which they would not be allowed to do otherwise.
What is the best way to give? Money and time have alternative uses. Some private enterprises have come into being (Global Giving, as an example) that are doing research on both successful and unsuccessful initiatives of philanthropy, providing information on the impacts of alternative projects on the lives of actual beneficiaries from different parts of the globe and helping to connect givers and receivers thousands of miles apart. It is business for them. The objective of their analysis is to provide maximum impact per dollar spent in philanthropy. For example, it is possible that providing mosquito nets or safe drinking water may produce greater impact (per dollar spent) on the lives of the beneficiaries than providing medicines to treat malaria or chronic diarrhoea and malnutrition.
(The writer is a former professor of economics at IIM, Calcutta)
