Warren Buffett's Son: Charity Fuels a 'Perpetual Poverty Machine'

Warren Buffett's Son: Charity Fuels a 'Perpetual Poverty Machine'

In 2006, financier Warren Buffett announced that he was going to give away 85 percent of his fortune to various charities. But today, Buffett’s own son, Peter, is saying that charities don’t work as well as they should and just create a “perpetual poverty machine.” He also says that rich people giving to charities is akin to “conscience laundering.”

Peter Buffett contributed an Op Ed to the International Herald Tribune (a New York Times publication) in which he cautioned that the “charitable-industrial complex” is not all it’s cracked up to be.

Buffett said that as he traversed the world of philanthropy in service to his father’s charitable giving, he began to notice that all too often the very rich people he was coming in contact with made a key mistake in their thought process on charity.

“People (including me) who had very little knowledge of a particular place would think that they could solve a local problem,” Buffett wrote. “Whether it involved farming methods, education practices, job training or business development, over and over I would hear people discuss transplanting what worked in one setting directly into another with little regard for culture, geography or societal norms.”

He then relayed a story of the unintended consequences of such philanthropic efforts. He noted that in one case when he convinced sex workers at an unnamed brothel to use condoms, instead of merely stopping disease and protecting sex workers from AIDS, his efforts actually created a new market: higher prices for special “unprotected sex.”

Buffett criticized the propensity of big-money charities for imagining that it was a natural fit to transplant business practices onto charitable efforts. He also said it was a mistake to assume that if something works in one part of the world it is a perfect, one-size-fits-all model for every such situation in all parts of the world.

The Buffett scion also pointed out that even as non-governmental charitable organizations have grown exponentially, “inequality is continually rising.”

Buffett said that, “the nonprofit sector has been steadily growing. Between 2001 and 2011, the number of nonprofits increased 25 percent. Their growth rate now exceeds that of both the business and government sectors. It’s a massive business, with approximately $316 billion given away in 2012 in the United States alone and more than 9.4 million employed.”

In closing he called for a new model of charitable giving, one that doesn’t just continue the funding of “a perpetual poverty machine.”

While his criticism of charities was well stated, his solution was a bit less clear. He seemed to attack capitalism for causing the world’s rising inequality, yet specifically said he isn’t calling for an end to capitalism. “I’m calling for humanism,” he said. What that means, he didn’t say.

But he did want people to start thinking outside the charity box that NGOs have created. “Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market,” Buffett asserted.

Unfortunately, there is a “crisis of imagination,” he said, one preventing the creation of “a new operating system” for improving the condition of the world’s teeming masses.

Peter Buffett isn’t the only one criticizing charities for their all too often unthinking actions. For several years a debate has been raging on whether or not the common ways that charities work are really doing any good at all.

Giving is certainly not a bad thing, but giving with no thought to the logic of the end result doesn’t do anyone any good and all too often the charities backed by big money seem to be more worried about the giving than in solving specific problems.

Peter Buffett is a well-known composer and the chairman of the NoVo Foundation, a group dedicated to mobilizing resources from public and private sources to assist the “empowerment” of women and girls.

Photo: Nati Hamik/AP