Private Charity versus the Political Grinches

First Published: 2020-12-24

by Richard Ebeling

First published at AIER here…

Christmas is a time of good cheer, gift-giving, and hopes for the New Year. This year, 2020, has been a hard and disturbing one for virtually all of us due to the coronavirus and, especially, the government’s heavy-handed shutdown and lockdown responses. What Christmas time also represents is a time of benevolence and generosity to family, friends, and others who may be in less fortunate circumstances than ourselves. 

According to the Benefactor Group, in 2019, total charitable giving in the United States equaled nearly $450 billion, of which 69 percent came from individual contributions, 17 percent from foundations, 10 percent in the form of bequests, and 5 percent from corporations. 

The Chronicle of Philanthropy reported in October 2020 that charitable giving in the first half of this year was up by 7.5 percent over 2019, in spite of the many financial and economic hardships experienced by those who may have been donors been badly affected by government’s command and control response to the coronavirus. Between January and June of 2020, charitable donations of $250 or less increased by an amazing 19.2 percent; it went up by 8.1 percent for giving in the $250 to $999 range, and rose by 6.4 percent for donations of $1,000 or more. 

There are an estimated 1.54 million private charitable organizations in the United States facilitating the giving and use of much of those generous contributions around the country. It has also been estimated that 25 to 30 percent of all adults in the U.S., out of a total population of more than 330 million, contribute their time for a calculated 8.8 billion hours of service for philanthropic purposes, having an estimated value of $195 billion. 

Self-Directing and Voluntarism as Hallmarks of a Free Society

The hallmark of a free society is that each and every individual is viewed as a self-governing person deciding on his own ends, selecting the seemingly appropriate means to hopefully attain his goals, and doing so in a social setting of free association, voluntary agreement, and mutual consent inside and outside of the competitive marketplace of supply and demand. A government in such a free society has the limited role and responsibility of securing and protecting every individual’s rights to their life, liberty, honestly acquired property, and the enforcement of contractual obligations into which they may have, respectively, entered on a voluntary basis.

This also means that in such a free society, what are often referred to as the common concerns of community members and the wider arenas of social life are the responsibilities of the voluntary associations of civil society. The ethical aspect to this view of the social order is that it recognizes and respects each individual’s right to make charitable and philanthropic choices and decisions on his own. 

That is, the free person may not be forced or compelled to “do good,” as defined by others. As in many other corners of social life, in a free society the avenues and methods to obtain the collaborative assistance of others is through reason, persuasion, and example. When those 80 to 100 million Americans offered and supplied almost 9 billion hours of themselves last year to participate and advance such charitable causes for which they gave their time, they were not conscripted by government, or directed into their actions by a central planning agency, or made to sacrifice their own goals and purposes against their will for those of others. 

Under a system of liberty, each person treats others with the due respect and dignity and regard with which a free man is expected to look upon his fellow human beings, even when some or many of those others choose paths and directions in their lives with which we may disagree or even disapprove. Through the use of force or its threat, you may be able to command or prohibit certain actions and activities of others, but in doing so, you do not directly control the source and engine of any person’s free actions and activities – his reasoned free choice as a thinking human being. 

Force or Its Threat as a Hallmark of the Plunder Society

External physical control is not a success story in mastery over the inner world of a person’s mind. The truth of this has been demonstrated in every instance of a dictatorial regime. There is an active attempt to repress the written and spoken words that oppose or contradict what those in political power consider dissenting disagreement with what they want to do or prevent. Especially in the totalitarian forms of tyranny, governments try to remold the thinking of their subjects to make them more willing and obedient servants to their political masters precisely so compliance will not require the cost and complications of the use of continuous brute force. Willing slaves are always preferable to recalcitrant ones. 

We live in an era when the political premise and presumption is that government is to play Santa Claus not just at the end-of-year holiday time but all 12 months of the year. Government is turned to, to provide all the goodies of everyday life that a growing segment of the American population expects to be given to them as an “entitlement.” It is not even necessary to avoid being “naughty” rather than being “nice.” Nothing that goes wrong in someone’s life is their fault, nor is any unfulfilled goal or desire due to a failure of personal effort, forethought or fortitude. 

No, it is the result of “oppression,” exploitation,” or more generally “society” and its institutions. Or, even worse, it is the product of an amoral attitude of indifference that monies received through government coerced redistributions of income – regardless for what purpose – are just as legitimate a source of earnings as salaries, profits, and interest acquired through the consensual transactions of the marketplace. The boundary line between incomes from free exchange versus political plunder has increasingly seemed to have disappeared. There is nothing wrong with taking what belongs to another by force or its threat, if it is done through the political means of the government under any name or slogan that may be used to rationalize the theft. 

Government Coerced Takings are Huge Amounts

Even before the additional $2 trillion of federal expenditures in the government’s 2020 fiscal year (that ended on September 30, 2020), which resulted in total federal spending of more than $6.55 trillion, the Congressional Budget Office (CBO) had projected in January that government outlays would come to $4.7 trillion by the end of September, before the coronavirus crisis ballooned the largess flowing from Washington, D.C. 

As it was, for fiscal year 2020, Social Security payments came to $1.155 trillion; medical and health-care related expenditures were $1.504 trillion; Treasury Department outlays (containing CARES Act payments) were $1.152 trillion; the Labor Department spent $478 billion (containing increased unemployment benefits); Department of Education expenditures were $204 billion (including costs cut from student loans); Transportation Department spending came to $100 billion (also containing CARES Act payments). All of these, and many other of Uncle Sam’s departments, bureaus and agencies, saw greatly increased outlays from what already had been planned as Big Government’s big spending, pre-Covid-19, for fiscal year 2020. 

From this $6.55 trillion in federal government spending, only $3.42 trillion was covered by taxes collected, leaving a $3.13 trillion deficit that had to be covered by government borrowing, or nearly 48 percent of total government expenditures. We must not forget that there are no free lunches. The $3.13 trillion of borrowed money were not just paper dollars lent to Uncle Sam; each of those borrowed dollars represented all the real goods and services acquirable in the marketplace, given the purchasing power of the monetary unit. This, too, was an extraction of a hefty sum of what otherwise would have been available to be purchased and used by people in the private sector, which was shifted, instead, into the hands of the government just as much as the transfer of purchasing power and real goods and services through the more direct means and methods of taxation. 

The Plunder Grinches Who Steal Joy 12 Months a Year

Those who turn to the political process for such redistributions, favors, benefits, protections, and subsidies from the government are all forms of The Grinch Who Stole Christmas. Unhappy and frustrated with how people spend their own money on the things that matter to them, and thus “distributing” incomes to those who participate in the supplying of the various goods and services through the prices they freely pay and the quantities they voluntarily choose to buy, they decide to steal a part of it away to undermine the joy of others who spend the incomes they have more honestly earned. 

Of course, in the realities of the political interventionist and welfare statist processes, some of the special interest “Grinches” also end up looting each other, as well, through the taxing, borrowing and spending of the paternalistic state. After a time, with so much of the income and wealth of the society passing from one set of hands to another through the intermediary agency of the government, it becomes often difficult to be sure who has really, anymore, fully earned an “honest dollar” and which have more rather than less of what they receive dependent upon the “churn” of the political-influenced wheel of fortune. This, of course, also helps to blur the ethical certainties of all that goes on in the society. 

Unlike in the Dr. Seuss story, the political plunder Grinches never seem to have a change of heart. Their appetite to steal the income and wealth joy of honest others in society never tires or ends. If the Congressional Budget Office projections are even near being correct, it will only keep growing worse in terms of the amounts taxed, the amounts spent, the amounts borrowed, and the amount of total debt to expect over the coming decades. 

It can be said, certainly, that there may be numerous special interest groups pigging themselves out at the trough of government largesse. Interest groups like farmers being paid through government subsidies, or large companies and corporations receiving sweetheart government contract deals or domestic regulations that protect them from competition, or trade barriers protecting them from foreign rivals, or . . .

Reasonable Concerns for Others Also Best Served Privately

However, what about the needy and the poor? What about those who have fallen on hard times, or who were born into disadvantaged circumstances, or lack the education to be more self-supporting, or live in bad housing in crime-infested neighborhoods, or . . . Surely, at least in these instances, a helping hand from the government is not out of place. If not the government, who will take on these serious and expensive responsibilities? 

The friends of freedom suggest that even here, the best answers are to be found in the charity and philanthropy of the private sector and the voluntary institutions of civil society. It is, unfortunately, a lost and forgotten history that there was a time and a world before the modern welfare state. In the heyday of classical liberalism in the 19th century, it was increasingly taken for granted that it was both moral and practical to leave these matters outside of the control and provision of the government and the political process. 

Its morality was based on the idea that free individuals should be respected in the income and wealth they had honestly earned, and that it was presumptuous of the State to claim that it knew better how people should spend that which they had earned. If a sense of benevolence and charity were to be fostered among a free people, it was most likely to develop in a social setting in which each and every person would be called upon to listen to and cultivate a humane sense of properly understood concern for the well-being of their fellow human beings. (See my articles, “A World Without the Welfare State” and “The Secret History of the Monopolization of Welfare by the State”.)

Passing on the Lessons of Private Charity to Future Generations

Indeed, the French social philosopher Bertrand de Jouvenel (1903-1987), in The Ethics of Redistribution (1951), emphasized that reasonable social awareness on such matters depended upon two things: the free leisure time to give of oneself to charitable causes that individuals found to be worthy of their attention, and untaxed discretionary income and wealth that enabled them to have the financial wherewithal to give the monies to support such judged good causes. 

In addition, de Jouvenel said, the use of such leisure time and the earned money to give to philanthropic causes also served as the means through which one generation taught another what they should view as healthy and ethical senses of responsibility to others, as the young watched and learned from and participated with parents and grandparents in such endeavors. 

Increased Sense of Personal Responsibility with Private Charity

Also, worthy of note is that the very voluntarism of private charity requires of the benefactor that he make his own informed judgment about the causes appealing for his assistance, rather than increasingly abrogating personal responsibility for all such matters by saying to himself and others, “I’ve paid my taxes, it is the job of those in government to see to these affairs of helping others.” Surely, over time, this desensitizes and dehumanizes the shared human experience by shunting it off onto the faceless and numbers-reducing nature of the process that inevitably happens when left in the hands of bureaucracies.   

At the same time, what are the incentives for “solving” social problems within the bowels of government bureaus and agencies? Reducing poverty, increasing literacy, and expanding the number of self-responsible and supporting individuals results in those employed in and managing such government agencies working themselves right out of their jobs. How do the senior executives in the government bureaus rationalize and make the case for increases in their next year’s budget if they have to tell the legislative oversight and financial committees that the mission has been accomplished? Increased funding and enlarged staff with more jurisdictional authority comes from arguing that “the problem” is worse than even previously thought, and only more taxpayers’ money and increased power can really get to the “root causes.”  

This is radically different in the arena of private charity and philanthropy. Here the officers in the private “nonprofit” have to persuasively and successfully explain to potential and existing donors why the cause for which they are asking a contribution is a deserving and worthwhile one. After all, they do not have to give a dime if they don’t think this way of using their own money is more valuable than in some other direction, including supporting competing charities. 

A Private Charity Must Show the Donor’s Money is Well Spent

Furthermore, to remain in business as such a nonprofit requires not only demonstrating to those voluntary donors the desirability of the cause and how you propose to use their money to move forward to its “solution” or improvement, you must, then, when next giving season comes around, successfully show how every dollar and cent has been applied, and what the positive results have been up to that date, if a hoped-for renewal or increase in that voluntary giving is to be forthcoming. 

For five years, I had the opportunity to serve as the president of a free market-oriented educational nonprofit foundation. There was no political well of taxpayers’ money from which to draw to fund salaries, programs, publications, and activities. In the eyes of government bureaucrats, taxpayers may be irritants to avoid except when fleecing and controlling them. But in the world of private charity, every donor, regardless of the size of their generosity, is a real person to treat with respect and appreciation. Because everything you try to do relies upon their goodwill and confidence and trust, since nothing that you can do can happen without their financial and other types of support. 

Any seller of any product in the profit-making marketplace has to be alert to the fact that his customers have other ways to spend their money, including on the wares of his own competitors, and that he must always be “on his toes” to offer a new, better, and less expensive good or service, if he is not to lose business to some rival. 

That same awareness and competition means that everyone managing and working within a charitable organization must also constantly and continuously look for ways to advance “the cause” for which they are working. Those charities demonstrably succeeding in their activities, and more effectively than their competitors in their own and related philanthropic sectors, may draw more donors and contributions over time; those that don’t in the eyes of financial supporters will have to cut back and maybe eventually leave the arena completely due to their inability to prove their effectiveness. 

This all, in my view, highlights the ethical virtue and practical utility of private charity and philanthropy over anything comparable that is transferred to or left in the hands of government and their tax-funded bureaus, agencies and departments. 

End Government Paternalism and the Private Sector Will Do the Job

Finally, it might be said and asked, while that nearly half a trillion dollars of private giving in 2019 may be impressive, would the private sector really “give enough” if the government was removed from these activities? At one level, of course, no one knows for sure with absolute predictable certainty, though this partly depends on different views and values concerning what types of charitable activities are needed and desirable outside the market arena of profit-oriented supply and demand. 

But imagine that accompanying such a removal of government spending, there occurred a comparable reduction in government taxing and borrowing. If those tens of millions of people who now give almost half a trillion dollars with the existing tax burdens they bear had their taxes reduced, why would we not expect that with such a general relief in taxes paid, private sector giving would not increase dramatically, and in effectively used ways? Combine this with more of the society’s resources freed from government for private enterprise to raise more people out of poverty and greater employment opportunities through increased work, saving, and investment, and the “social problems” that still cause concerns among many will be fading away with each passing year. 

We should not forget the power of the private sector not only in the marketplace of profit-making supply and demand, but in the charitable good works and efforts of voluntary giving in the other institutions of a free civil society. Let us not forget that benevolent caring, sharing and gift-giving is what the spirit of Christmas is really all about, and most especially in a society of liberty.

Dr. Richard Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel, in Charleston, South Carolina.

Dr. Ebeling is the author of Austrian Economics and Public Policy: Restoring Freedom and Prosperity  (2016); Monetary Central Planning and the State (2015) as well as the author of Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition (2010) and Austrian Economics and the Political Economy of Freedom (2003). And the editor of the three-volume, Selected Writing of Ludwig von Mises, published by Liberty Fund.

He is also the co-editor of When We Are Free (Northwood University Press, 2014), an anthology of essays devoted to the moral, political and economic principles of the free society, and co-author of the seven-volume, In Defense of Capitalism (Northwood University Press, 2010-2016).

Visit Dr. Ebeling’s Archive here…
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