Philanthropy: To Boldly Go Private Sector, Part Five

2 Jul

From www.mcgeepost.com .Copyright © 2013 Michael H. McGee. All rights reserved. Please feel free to share or re-post all or part non-commercially, hopefully with attribution.

In Parts One through Four of this series we have set up the nature of the problem with philanthropy and the quest for solutions. It will be easier for you to understand this concluding Part Five if you have read the preceding three parts. They are long, yet worth the effort.

Don’t let your death bequests be the measure of your generosity. “What are you doing for the rest of your life, the north and south and east and west of your life?”

The big challenge is: what do you do with all that money you’ve made. Once you reach a certain level of wealth there’s really not much to spend all that money on but more of the same. There’s been a great accretion in money over the last fifty years, but not any concomitant increase in what you can buy with it.

I’ve generated the term “accretion” to describe the phenomenal growth in the supply of money over the past fifty years. “Inflation” is a specific increase in the level of consumer prices over time.

The massive accretion of the available supply of money has made a lot of new billionaires and multi-millionaires. Yet the value of this vast accretion of money is highly questionable. Once you have your life-line stash set aside, then all the other dollars or euros are almost as useless as measures of “value” as the green leaves on trees, which turn brown and fall off each autumn.

For most wealthy people, those extra accreted green-backs are little more than toys on a board-game. All you can really buy with them is more of the same of what you already have. This is why you’re so eager to give this extra money away to charity at your death. They mean so little to you now except as a score-card. www.thegivingpledge.org is a death list of the wealthy, who with their on-line pledges are erecting their tombstones now.

Yet to the economy as a whole, those leaves on the trees are the foundation of the stability of the United States as a nation, or the stability of whatever nation you are from. Your “toys” are the vital blood and bone of the nation as a whole. Think of this larger picture instead of feeling the uselessness of simply “having.”

I’m not saying twenty first century philanthropy should ignore the rest of the world and focus solely on your own country. What I’m proposing is the well-known truth that a person or a country cannot help another person or country unless the helping person or country is strong and healthy in its own right.

First-world countries around the globe, including the US, are doing great harm to themselves with their own internal financial stability crises. How can a floundering nation actually provide either charitable or market-based solutions for the developing world, if we can’t manage our own markets and put our own people to work? The G-8 and G-20 need to take care of these First Things first, and the rest will follow naturally as a benefit to the whole world.

The first thing you can do to give more meaning to your wealth is to get actively involved, using your money, clout and financial acumen, in working to repair the great debt and liquidity messes which are now plaguing the G-8 and G-20 nations. If 105 billionaires applied themselves to the current financial mess in these nations, in a creative and intelligent way, stability would return to the world markets in a much shorter time than with the current chaos.

Next, “give away” more of your fortune within the private sector. Use some of your personal wealth as tax-deductible grants to your companies to give pay raises and substantial bonuses to your employees – all of them. Owners of Wal-Mart, pay close attention here.  Direct that your companies give pay raises, bonuses, and better benefits out of corporate funds to all the employees in your home country. This increase in wage costs may cause a temporary distortion in stock prices, yet things will settle as your employees are able buy more consumer goods, or pay off student loans faster: or, they get more invigorated with energetic loyalty to their employer and produce better results.

Those at the top who generate the results in your companies are not just the CEO. There are at least five levels down in management where results are either made or lost, plus many technical people who are absolutely critical. All of these management and technical people should have substantial increases in pay and bonuses and benefits, which reflect their critical part in the results obtained.

It is really horrible from a true business point of view that the ignorant public and the so-called “Occupy Wall Street” protesters have made it more difficult for financial employers to give large bonuses to their traders and other executives. Such large payments, and similar activities, are a core part of twenty-first century philanthropy: paying people for the value they bring to the enterprise, rather than bidding salaries and wages solely at the lowest market rate.

Bill Gates has already proven beyond a doubt that paying people more than market wages and bonuses is a turbo-charged wealth creator. Thus he’s one of the harbingers of twenty-first century philanthropy: releasing great sums into the private sector and profiting thereby.

Twenty-first century philanthropy also involves improving tax-paying employment and consumer prospects in the United States (or in your native country, if another). In the last fifty years the United States has virtually ceded the playing field for manufacturing to the rest of the world. Now is the time to take it back.

Those manufacturers in China and Bangladesh and other emerging nations will not have to suffer too much. If they raise the wages in their own factories, then they’ll be able to sell their manufactured products to their own people. If they don’t figure this out, then they will suffer at their own hands. It’s not our problem.

We have no moral obligation to “assist” third world countries by throwing money at them and buying their products, regardless of what Angelina Jolie and George Clooney say. Investments should be made only if they can produce a profit: and twenty-first century philanthropy says we have a “moral obligation” to assist the economy of our own country, which has taken a real beating lately; and our unemployed and poorly paid citizens.

Bill Gates and Larry Ellison and Paul Allen and the other tech billionaires could start building factories inside the United States to make the machinery and equipment which is necessary to build electronic parts. The next step is to build factories in the United States to assemble these electronic parts, and facilities inside the United States to package and distribute the assemblages at a wholesale and retail level.

Intel is already leading the way by chunking more than $10 billion into constructing the one-million-square-foot state of the art Fab 42 plant in Arizona, building another major manufacturing plant in Hillsboro, Ore., and upgrading other facilities in Arizona, Oregon and New Mexico. See http://usatoday30.usatoday.com/tech/news/2011-03-28-intel-manufacturing.htm .

Intel is going against the grain of twentieth century thinking by not worrying too much about any added costs of making their products inside the United States. They will succeed mightily. They will succeed even more fully if other electronics makers follow their lead and choose the United States as the place to build their manufacturing plants.

The Walton family has up to now succeeded with Wal-Mart primarily by buying manufactured goods from China and other developing countries at the lowest possible price. Then they foist off these cheap goods onto a public which can’t afford to pay more because either their own wages are depressed, or they are out of work or otherwise struggling to make ends meet. This is the classic twentieth-century principle of hollowing out the economy, and then selling cheap to the hollowed out people.

Many of the Walton family members also, admirably, practice twentieth century philanthropy. They set up non-profit foundations, give to local charities around the country, and show a quite decent level of generosity. What I want to do here is to push them, and other retail giants, to look into the possibilities of twenty first century philanthropy as an outlet for their inherent generosity.

It’s definitely not just Wal-Mart. It’s absolutely amazing how many of our sellers of consumer goods are forced by the market to put on their shelves only goods manufactured in developing countries. I was shopping in a local neighborhood Ace Hardware the other day, when I began to look at the labels. I was shocked to see that almost every product on the shelves was manufactured in China. This would not have been the case even five years ago.

Twenty-first century philanthropy for retailers involves, among other things, improving tax-paying employment and consumer prospects in the United States (or in your native country, if another). In the last fifty years the United States, led by Wal-Mart, has virtually ceded the playing field for clothing and other retail goods to the rest of the world. Now is the time to take it back. Wal-Mart will need to lead the way, since no one can really compete with them by being the first to raise wages and prices.

Start, Wal-Mart, with raising wages and benefits for your retail store employees and managers, all the way to the top. Then stop playing games with the grocery business; it’s not your core competency. It will hurt you in the end, but not until it seriously impairs a thousand retail grocery chains. Then set your best and brightest planners and managers to a new task which is absolutely within your core competency, and will represent twenty first century philanthropy.

Since Wal-Mart and Amazon and others know retailing, and already inspect quality and set standards in factories around the world, building and operating manufacturing plants inside the United States should be a no-brainer. Start by building factories inside the United States to manufacture the machinery and equipment which is necessary to install in factories to weave and sew textiles and make rope and plastic goods and other things.

The next step is to build state of the art textile mills and dye houses and cut and sew facilities inside the United States. Also build plastic stamping plants and facilities to make rope and paint and other goods, inside the United States, and facilities inside the United States to package and distribute each of the finished products at a wholesale and retail level.

Knowing something of the company’s supply-chain philosophy, Wal-Mart may be more comfortable with making investments in other enterprises inside the United States to make these products locally and sell them to Wal-Mart. In any event, even if Wal-Mart shrinks temporarily on the retail side, the manufacturing side will increase profits in the long run.

It’s really hard to imagine having “textile mills” in the United States again. I grew up in North Carolina and textile mills were a way of life, and a part of the lifeblood. Now I doubt you could find even one textile mill in North Carolina.

The Walton family members may want to use some of their individual wealth in building or funding these manufacturing plants inside the United States. In any event, put the money to work in a way that will make a difference to your country and your people, and still make a profit.

Kurtis Lockhart, an economist and writer in Vancouver, Canada, says “he truly believes that social enterprises – using market-based solutions to address social problems – will begin to replace traditional philanthropy and conventional corporations in the 21st century.” Although his views may be somewhat extreme, his thesis that “market-based” solutions are necessary is consistent with what we’ve been writing here.

He focuses on third-world countries and how social enterprises may help them. I have a very different focus, however. My focus is that our own country, the United States, will have continuous bumpy economic conditions over the next years unless we apply “market-based” solutions to our own economy. We are a very strong country, yet we are not invulnerable. There’s plenty of kryptonite out there, and we need to get our twenty first century philanthropy in gear sooner, rather than later, to give our country the chance it needs to ride smoothly through the next hundred years.

And only if the United States and the other G-8 and G-20 nations are strong and prosperous, will developing and third-world
nations find any traction in their own serious efforts to move ahead economically. Only the strong can help the weak. It’s that simple.

 

One Response to “Philanthropy: To Boldly Go Private Sector, Part Five”

Trackbacks/Pingbacks

  1. Philanthropy: What To Do In Its Place? Part Four | mcgeehome - December 18, 2013

    […] We’ll continue with more ideas, and cement the relationship between wealth and twenty-first century philanthropy, in the fifth and last installment, at https://mcgeepost.com/2013/07/02/philanthropy-to-boldly-go-private-sector-part-five/ […]

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