Reference no: EM133046732
CASE STUDY Tech billionaires turn philanthropists
Today's tech CEOs control global corporate empires of immense economic power, and also personal wealth of many billions of dollars. Like the tycoons of earlier generations, having accumulated personal fortunes from their business success, their thoughts turn to their legacy. They might wish to 'give back' some of their wealth for charitable causes, to be remembered for making the world a better place. In today's financial environment, they might also be conscious that charitable structures are advantageous vehicles for tax purposes and for investing to enhance their wealth still further. The same attention to managing assets and controlling financial investments that helps them as successful CEOs comes into play in directing philanthropic activities. Thus, Bill Gates, Microsoft's founder, has built a parallel organization, the Bill and Melinda Gates Foundation, which is active in health provision in African developing countries, through its own projects, bypassing governments. It is bringing healthcare and disease prevention that are desperately needed. But this is not publicly accountable through democratic institutions. It is private-sector activity, accountable to its owners alone.
In 2015, Facebook's founder, Mark Zucker-berg, set up the Chan Zuckerberg Initiative with his wife, Priscilla Chan. He explained his aims as 'advancing human potential and promoting equality' (Rhodes and Bloom, 2018). Those ideals now look rather tarnished in light of revelations about Facebook's flagrant breaches of privacy law in pursuit of profits. It emerged that Mr. Zucker-berg's initiative was not legally a charity, but a private company. In 2017, it gave $3 million to aid the housing crisis in Silicon Valley, where the concentration of tech companies has led to an astronomical rise in house prices. Those who listened to his idealistic sentiments on equality would justifiably feel they had been misled. Mr Zuckerberg would have learnt that his philanthropic intentions arouse accusations of hypocrisy.
Amazon's CEO, Jeff Bezos, announced in 2018 that he would give $2 billion to a new philanthropic fund for primary schools and housing for the homeless. Although this large sum is intended for social betterment, the announcement fell on a sceptical public. Amazon warehouses are notoriously managed as highly regimented and stressful places to work. Some workers at Amazon's warehouses have resorted to camping in tents next to their workplace, as they cannot afford housing on their low pay. Amazon workers would say he should improve the pay and conditions of his own workers and allow trade unions to operate. But, of course, his ruthlessness is key to his business success - and his wealth. In Seattle, where Amazon is based, he opposed a local law designed to tackle the area's homelessness crisis.
Amazon paid no federal income tax for the second year running in 2018, despite seeing a doubling of profits from $5.6 billion in 2017 to $11.2 billion in 2018. In fact, it received a rebate of $270 million in 2018. Following a competition among several cities, Amazon had planned to build a second headquarters in Long Island City, New York. Cities were unashamedly competing on the lavishness of their tax incentives. The Long Island location would have been worth nearly $3 billion in state and local subsidies, as well as tax breaks. The company envisaged 25,000 jobs, and the local Democratic establishment approved. There was also support among local residents. But a mixture of opponents, including trade unions and the progressive Democrat, Alexandria Ocasio-Cortez, newly elected to Congress, were opposed, and mounted a campaign against the plan. They feared a rise in house prices and objected particularly to the tax breaks. Hostile questioning of company representatives in a city council meeting focused on Amazon's labour practices globally and on its facial recognition technology that was sold to US Immigration and Customs Enforcement. Amazon decided to pull out of the plan to build in Long Island, rather than to negotiate a way forward.
Today's multibillionaires have been able to build their fortunes not simply because of their entrepreneurial flair, but because the free market economy allows the self-interested accumulation of huge wealth in the hands of the few. For those at the top, what matters most is that this system will be perpetuated by government policies. Specifically, they require a business environment of minimal regulation, few employment rights, weak trade unions and low taxes. They favour low public spending on social programmes but are happy to accept government money themselves. Policies so tilted towards the owners of wealth and away from the millions beneath them create highly unequal societies. Market economies have thus evolved into market societies, stacked against those at the bottom. For those at the top, concentration of economic power brings political influence in the corridors of government. And their impacts in society are also channelled through educational institutions, political parties, think tanks and charitable foundations. Indeed, many of these, including educational trusts and quasi-research think tanks are legally charitable, not-for-profit organizations.
Problems of poverty, homelessness, inadequate education, and poor healthcare are universal. Good governance in any society should ideally seek sustainable and inclusive policies through public accountability. That is the ideal, but governments are beholden to the powerful elites in society, which means the rich and powerful business interests.
The philanthropist is often drawn to idealistic goals of 'giving back', helping the poor, or funding education. Why not just pay taxes and give to charities? A founder like Mr. Zuckerberg wishes his charitable activity to be carried out as he would carry out his business: controlling where the money goes and how the money is spent. His spending on good causes follows the same market orientation as his business activities. Philanthropy thus becomes market oriented. The winners from the inequalities of the system see themselves as the right people to redress the inequalities that they have been largely responsible for creating. In these ways, they extend their sphere of control, penetrating ever more deeply into society.
Questions
- What is the tech billionaire's view of philanthropy?
- Describe the tech CEOs' relationship with government and politicians, as shown in this case study.
- New Yorkers in the area of Long Island City were divided on the building of a new Amazon HQ. Which side would you have been on, and why?
- The private jet symbolizes the lifestyle of today's billionaire business elites, presiding over empires that span continents. Have they made the world a better place?