Billionaire Philanthropy: A New Gilded Age

Have you ever wanted to gain admission to an exclusive club? Like New Haven’s Skull and Bones, for instance, the secretive society of Yale University students and alumni that has admitted each of America’s Presidents named George Bush? Or the Academy of Motion Picture Arts and Sciences, the group that collectively votes each year to recognize America’s finest actors, actresses, and films?

The aura of exclusivity maintained by these clubs, though, pales in comparison to that maintained by a small collection of billionaires who have taken the Giving Pledge. Oddly enough, the group actually appears to be growing more exclusive, even as it drastically increases its membership ranks. And their ranks are indeed growing quickly, with last week’s 16 new recruits expanding the roster by over 30% in one fell swoop.

But who are the members of the Giving Pledge? And what did they need to do, and who do they need to be, in order to gain admission to this exclusive club?

You Know What’s Cool?

Back in 1977, the comedian Steve Martin explained how people can be millionaires and yet never pay income taxes. The secret, he confided, was that people should “first … get a million dollars!”

After 33 years of wealth inflation, however, the minimum level of wealth required to ascend to the ranks of the filthy rich now appears to be a billion dollars. That’s why Justin Timberlake, in the role of Napster founder Sean Parker in the film The Social Network, emphatically tells the character of Facebook entrepreneur Mark Zuckerberg “A million dollars isn’t cool. You know what’s cool? A billion dollars!”

But the real Mark Zuckerberg, reported by Forbes to be worth close to $7 billion, was one of the 16 billionaires who joined the Giving Pledge last week. And he certainly qualified for admission in accordance with the two sole criteria for joining the group. Criterion #1? He is an American billionaire. Criterion #2? He has agreed to donate a majority of his wealth to charity in his lifetime.

An Interesting Twist

The current roster of members who have joined the Giving Pledge reads like a “Who’s Who” of American economic royalty. For instance, by the time readers progress to “G” on the alphabetically ordered roster, they’ve already encountered Michael Bloomberg, Warren Buffet, and Bill Gates!

This sudden spike of interest in philanthropy among the affluent actually mirrors a similar trend that occurred during America’s Industrial Age. Steel magnate Andrew Carnegie, for instance, donated generous sums for the construction of New York City’s Carnegie Hall. The Astor, Lenox, and Tilden families contributed to the development of the New York Public Library. Chocolate baron Milton Hershey dedicated his fortune to the creation of the Hershey School for disadvantaged children, an institution that still exists today. And the Rockefeller family donated the very land on which resides today’s headquarters building of the United Nations.

There’s an interesting twist, though, in the philanthropic practices of today’s generous givers; they are agreeing to give away the majority of their wealth while they are still alive and able to monitor the spending practices of their beneficiaries. Unlike the donors of the past, who primarily arranged to distribute the bulk of their fortunes after they died, such contemporary arrangements may enable these extremely savvy business men and women to offer their own valuable managerial expertise to the nonprofit organizations that are receiving their funds.

Why So Many?

Of course, considering that the number of American billionaires has exceeded 400, the Giving Club’s roster certainly has room to grow. But why are there so many billionaires in the United States today, during a deep and grinding recession that is eating away at the wealth of the average American?

The reason is that, for a multitude of reasons, the disparity of wealth between the rich and the poor in America has reached record levels. With the unemployment rate still increasing towards 10%, and with the interest rates on traditional bank savings accounts hovering around a paltry 1%, the poor are undeniably growing poorer. And with the ascendant Republican Party able to lock in favorable income and estate taxation rates for the wealthy, the rich are likewise growing richer.

That doesn’t take into account, of course, the fact that individuals locked in poverty can still succeed in the tradition of Horatio Alger and move into the ranks of the wealthy. The rapper musician Jay-Z, for instance, grew up in a public housing project in Brooklyn, New York, as did Starbucks CEO Howard Schultz. Both are now tremendously successful in their respective fields.

Nevertheless, it is important to acknowledge that governmental policies are supporting the economic and social conditions that are enabling so many Americans to amass extremely large personal fortunes. Fortunately, with the growth of the Giving Pledge, more and more of these billionaires are choosing to repay society in a charitable manner.