Attacking the attack on Buffett’s rant

Attacking the attack on Buffett’s rant

Published: Wednesday, 31 Jul 2013 | 12:18 PM ET

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Peter Buffett

When your last name is Buffett, two things are guaranteed: You’re going to get attention, and you’re going to have your share of both passionate supporters and virulent critics.

Peter Buffett proved the rule with his recent op-ed in The New York Times headlined “The Charitable-Industrial Complex.”

Buffett, who founded the NoVo Foundation with help from Warren Buffett, said philanthropy has failed to address the core inequalities and social problems in the world, and simply makes the rich feel better about their wealth.

(Read more: Millennials want to donate to charities, save the world)

Philanthropy, he said, has become “conscience laundering” for the rich, who are “searching for answers with their right hand to problems that others in the room have created with their left.”

He added that charity is burgeoning into a massive industry that just allows “the rich to sleep better at night,” while the world’s poor languish.

Buffett’s piece has sparked the biggest debate over philanthropy in years—probably the biggest since Warren Buffett and Bill Gates launched the Giving Pledge in 2010. The op-ed elicited a wave of support and requotes on Twitter and online, with many citing his lines about “laundering” and the “perpetual poverty machine.”

(Read more: Buffett, Gates: How giving may be hurt)

But philanthropy supporters have made three counterattacks to Buffett’s piece:

Charity is not really growing. Buffett claimed that charity’s growth rate now “exceeds that of both the business and government sectors.” But according to Giving USA, total giving was around $ 316 billion last year, up 1.5 percent in inflation-adjusted dollars. That’s still well below the peak of $ 344.8 billion in 2007, and the amount is unlikely to return to its peak for at least six to seven years, according to Giving USA.

As Tom Watson mentions on Forbes, “philanthropy today represents roughly 2 percent of GDPand has been stagnant at that level since roughly 1970.”

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The problems the rich are trying to solve are not necessarily the problems those same people created. As Matthew Bishop and Michael Green, authors of Philanthrocapitalism, write: it is hard to argue that Bill Gates has “contributed to, say, all those children dying from malaria that he is trying to save.”

(Read more: Rich give less but ‘invest in solutions’ more)

Assailing the motives of donors is not helpful. In his piece, Buffett criticized what he calls “philanthropic colonialism,” saying that businesspeople have invaded the world of good deeds with corruptive terms such as “return on investment.” But Phil Buchanan and others argue that what is needed is “data about what works (and in what contexts), for bringing the views of those on the ground (grantees and beneficiaries) to decision-makers, for performance assessment that is rigorous and thoughtful, even (gasp) for meetings among those who might learn from each other.”

In short, then, the solution is not less philanthropy, but more effective and informed philanthropy by people who truly care about solving big problems.

—By CNBC’s Robert Frank. Follow him on Twitter @robtfrank.

Billionaire Warren Buffett’s son Peter recently sparked a ferocious debate over the role of philanthropy with an op-ed he published. A look at the arguments that continue to rage on days later.

High Net Worth


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