Want to tackle inequality? Then first change our land ownership laws

George Monbiot in The Guardian

What is the most neglected issue in British politics? I would say land. Literally and metaphorically, land underlies our lives, but its ownership and control have been captured by a tiny number of people. The results include soaring inequality and exclusion; the massive cost of renting or buying a decent home; the collapse of wildlife and ecosystems; repeated financial crises; and the loss of public space. Yet for 70 years this crucial issue has scarcely featured in political discussions.

Today, I hope, this changes, with the publication of the report to the Labour party – Land for the Many – that I’ve written with six experts in the field. Our aim is to put this neglected issue where it belongs: at the heart of political debate and discussion.

Since 1995, land values in this country have risen by 412%. Land now accounts for an astonishing 51% of the UK’s net worth. Why? In large part because successive governments have used tax exemptions and other advantages to turn the ground beneath our feet into a speculative money machine. A report published this week by Tax Justice UK reveals that, through owning agricultural land, 261 rich families escaped £208m in inheritance tax in 2015-16. Because farmland is used as a tax shelter, farmers are being priced out. In 2011, farmers bought 60% of the land that was on the market; within six years this had fallen to 40%.


Homes are so expensive not because of the price of bricks and mortar, but because land now accounts for 70% of the price


Worse still, when planning permission is granted on agricultural land, its value can rise 250-fold. Though this jackpot was created by society, the owner gets to keep most of it. We pay for this vast inflation in land values through outrageous rents and mortgages. Capital gains tax is lower than income tax, and council tax is proportionately more expensive for the poor than for the rich. As a result of such giveaways, and the amazing opacity of the system, land in the UK has become a magnet for international criminals seeking to launder their money. 
We pay for these distortions every day. Homes have become so expensive not because the price of bricks and mortar has risen, but because the land that underlies them now accounts for 70% of their price. Twenty years ago, the average working family needed to save for three years to afford a deposit. Today, it must save for 19 years. Life is even worse for renters. While housing costs swallow 12% of average household incomes for those with mortgages, renters pay 36%.

Because we hear so little about the underlying issues, we blame the wrong causes for the cost and scarcity of housing: immigration, population growth, the green belt, red tape. In reality, the power of landowners and building companies, their tax and financial advantages and the vast shift in bank lending towards the housing sector have inflated prices so much that even a massive housebuilding programme could not counteract them.

The same forces are responsible for the loss of public space in cities, a right to roam that covers only 10% of the land, the lack of provision for allotments and of opportunities for new farmers, and the wholesale destruction of the living world. Our report aims to confront these structural forces and take back control of the fabric of the nation.

A Labour government should replace council tax with a progressive property tax, payable by owners, not tenants. Empty homes should automatically be taxed at a higher rate. Inheritance tax should be replaced with a lifetime gifts tax levied on the recipient. Capital gains tax on second homes and investment properties should match or exceed the rates of income tax. Business rates should be replaced with a land value tax, based on rental value. A 15% offshore tax should be levied on properties owned through tax havens.

To democratise development and planning, we want to create new public development corporations. Alongside local authorities, they would assemble the land needed for affordable homes and new communities. Builders would have to compete on quality, rather than by amassing land banks. These public corporations would use compulsory purchase to buy land at agricultural prices, rather than having to pay through the nose for the uplift created by planning permission. This could reduce the price of affordable homes in the south-east by nearly 50%.

We propose a community participation agency, to help people, rather than big companies, become the driving force in creating local plans and influencing major infrastructure. To ensure a wide range of voices is heard, we suggest a form of jury service for plan-making. To represent children and the unborn, we would like every local authority to appoint a future generations champion.

Councils should have new duties to create parks, urban green spaces, wildlife refuges and public amenities. We propose a new definition of public space, granting citizens a legal right to use it and overturning the power of private landowners in cities to stifle leisure, cultural events and protest.

We propose much tighter rent and eviction controls, and an ambitious social housebuilding programme. We also want to create new opportunities for people to design and build their own homes, supported by a community right to buy of the kind that Scotland enjoys. Compulsory sale orders should be used to bring vacant and derelict land on to the market, and community groups should have first rights to buy it.

To help stabilise land prices and make homes more affordable, we propose a new body, called the Common Ground Trust. When people can’t afford to buy a home, they can ask the trust to purchase the land that underlies it, while they pay only for the bricks and mortar (about 30% of the cost). They then pay the trust a land rent. Their overall housing costs are reduced, while the trust gradually accumulates a pool of land that acts as a buffer against speculation, and creates common ownership on a large scale.

We call for a right to roam across all uncultivated land and waterways (except gardens and similar limitations). We want to change the Allotments Act, to ensure that no one needs wait for a plot for more than a year. We would like to use part of the Land Registry’s vast surplus to help community land trusts buy rural land for farming, forestry, conservation and rewilding. We would like a new English land commission to decide whether to make major farming and forestry decisions subject to planning permission, to help arrest the environmental crisis. And we want to transform the public’s right to know, by ensuring that all information about land ownership, subsidies and planning is published freely as open data.

These proposals, we hope, will make the UK a more equal, inclusive and generous-spirited nation, characterised not by private enclosure and public squalor, but by private sufficiency and public luxury. Our land should work for the many, not just the few.

It's not just corruption. Entrance into elite US colleges is rigged in every way

An FBI sting revealed that wealthy parents are buying their children a place in top universities. But they’re not the only problem: the whole system is rigged writes Richard V Reeves in The Guardian 

 

‘Elite colleges are serving to reinforce class inequality, rather than reduce it.’ Photograph: Boston Globe/Boston Globe via Getty Images


Shock horror! Wealthy Americans are using their money to buy their children places at elite colleges. An FBI investigation, appropriately named Operation Varsity Blues, has exposed a $25m cash-for-admissions scandal. Coaches were allegedly bribed to declare candidates as athletic recruits; test administrators to change their scores, or allow someone else to take the test for them.

At the center of the cheating scheme was William “Rick” Singer, the founder of a for-profit college preparation business based in Newport Beach, California. Among the 33 parents caught in the FBI sting were Hollywood stars Lori Loughlin and Felicity Huffman. Loughlin starred in the series Full House. Huffman is famous for her role in Desperate Housewives; now she will be more famous as a desperate mom. And she’s not alone. The breathless anxiety among many affluent parents to get their kids into the very best colleges is a striking feature of upper-class American life.

Singer’s bribery scheme allegedly allowed parents to buy entrance for their offspring at some of the nation’s most prestigious colleges, including Yale, Georgetown University, Stanford University, UCLA, the University of San Diego, USC, University of Texas and Wake Forest.

FBI officers were at pains to point out that the colleges themselves are not being found liable; though nine athletic coaches were caught in the net.

“Following 10 months of investigation using sophisticated techniques, the FBI uncovered what we believe to be a rigged system,” John Bonavolonta, the FBI special agent in charge said, “robbing students all over the country of their right to a fair shot of getting into some of the most elite universities in this country”.

But here’s the thing: the whole system is “rigged” in favor of more affluent parents. It is true that the conversion of wealth into a desirable college seat was especially egregious in this case – to the extent that it was actually illegal. But there are countless ways that students are robbed of a “fair shot” if they are not lucky enough to be born to well-resourced, well-connected parents.

The difference between this illegal scheme and the legal ways in which money buys access is one of degree, not of kind. The mistake here was to do something illegal. Meanwhile, much of what goes on in college admissions many not be illegal, but it is immoral.

Take legacy preferences, for example. This boosts the admissions chances of the children of alumni; and for obvious reasons the alumni of elite colleges tend to be pretty affluent, especially if they marry each other. (They are also disproportionately white.) The acceptance rate for legacy applicants at Harvard, Yale, Princeton, Georgetown and Stanford is between two and three times higher than the general admission rate. If they don’t get in first time round, they might be asked to take a “gap year” and enter a year later instead, a loophole known as “Z-listing”. A Princeton study found that being a legacy applicant had the same effect as adding 160 SAT points – on the old scale up to 1600 – to a student’s application. Imagine if colleges gave that kind of admissions boost to lower-income kids?

As John W Anderson, the former co-director of college counseling at the Phillips Academy, an elite boarding school in Andover, Massachusetts, once admitted, of the students from his school who are Z-listed for Harvard, “a very, very, very high percent” are legacies. The Harvard Crimson estimates the proportion at around one in two.

Or how about donor preferences? Rather than bribing coaches, the wealthiest parents can just bribe – sorry, donate to – the college directly. In 2017, the Washington Post reported on the special treatment given to “VIP applicants” via an annual “watch list”. Applicants whose parents were big donors would have notes on their files reading “$500k. Must be on WL” (wait list). Even better, these donations are tax free!

As a general rule, the bigger the money the bigger the effect on admissions chances. Among elite aspirational alums, the question asked is “what’s the price?”. In other words, how much do you have to donate to get your child in?

Whatever the price is, those with the fattest wallets can obviously pay it. Peter Malkin graduated from Harvard Law School in 1958. He became a very wealthy real estate businessman, and huge donor. In 1985, the university’s indoor athletic facility was renamed the Malkin Athletic Center in his honor. All three of Malkin’s children went to Harvard. By 2009, five of his six college-age grandchildren had followed suit. (One brave boy dared to go to Stanford instead.)

How elite US schools give preference to wealthy and white 'legacy' applicants


Or how about Jared Kushner, Donald Trump’s son-in-law? Kushner was accepted into Harvard shortly after his father donated $2.5m. An official at Kushner’s high school said there was “no way anybody in the administrative office of the school thought he would, on the merits, get into Harvard. His GPA did not warrant it, his SAT scores did not warrant it.”

David E and Stacey Goel just gave $100m to Harvard. I’m going to go out on a limb here and say that their children probably have an excellent chance of Harvard admission.

Even those parents who are not in the wealthiest brackets, but are squarely in the upper middle class, can use their money to boost their kids’ chances, through tutors, SAT prep classes, athletic coaches. Students who apply early have better chances of admission, which favors more affluent families since early admission precedes financial aid decisions. Many colleges prefer students who have “shown an interest” in their college. How to show an interest? By visiting the campus – easy for those with money for flights and hotels, less so for those on modest or low incomes.

Small wonder that at elite colleges, including most of those targeted in the corruption scheme such as Yale, Duke, Stanford and Wake Forest, take more students from families in the top 1% of the income distribution than from those in the bottom 60% combined.

So hats off to FBI special agent Bonavolonta and his team for exposing the corruption admissions. But it is in fact simply the most visible sign of a much deeper problem with college admissions. Elite colleges are serving to reinforce class inequality, rather than reduce it. The opaque, complex, unfair admissions process is a big part of the problem. From an equality perspective, it is not just Singer and his clients who are at fault: it’s the system as a whole.

How the right tricked people into supporting rampant inequality

An LSE study has traced how we have come to swallow the meritocracy myth. This narrative needs to change writes Polly Toynbee in The Guardian

  

‘Talking to people using food banks and too often you hear people absorbing the blame. “I should have tried harder at school,” is a frequent refrain.’ Photograph: Murdo Macleod for the Guardian


Why don’t people rebel? The wonder of decades of rising inequality across the west is how placidly people put up with it. UK wages are still below 2008 levels, a growing sector of jobs are nasty – non-unionised, achingly hard, with workers treated worse, the boot on the employer’s foot despite low unemployment. You might call Brexit a kind of protest – but that can be overdone: the vote was swung largely by comfortable older Tory voters in the shires, led – or misled – by privileged ideologues.

Those on the progressive left have been perplexed that rising social injustice hasn’t led to much sign of the oppressed rising up, either in the ballot box or in protest. New research out on Wednesday from the London School of Economics suggests some explanations – though these will be of precious little comfort. Looking at surveys across the OECD’s 23 developed western countries since the 1980s, Dr Jonathan Mijs of the London School of Economics International Inequalities Institute monitors how, as countries become less equal, attitudes of the majority shift in the wrong direction.


Both rich and poor delude themselves they are ordinary

People come to believe more strongly that their country is a meritocracy where hard work and talent take people to the top. They are less likely to think structural inequalities or birth help or hinder people’s rise. The US, home of the American Dream – the myth that everyone has an equal chance to rise from log cabin to White House – is the most unequal, yet 95% now firmly believe in meritocracy, fewer in structural injustice. The UK, Australia and New Zealand are not far behind, sharing this Anglophone disease, a societal “body dysmorphia”: other European countries are less inclined to justify inequality, though the movement has been in that direction. This is the neoliberal triumph over hearts and minds.

The meritocracy myth comes with other tropes, especially placing the blame on the poor, with decreasing social empathy. Believing people sink through their own fault is the necessary adjunct for proving the mega-wealthy got there by merit alone.

In Britain, where inequality shot through the roof in the mid-80s and has stayed there ever since, we have seen how despising inequality’s losers has been deliberately fostered by governments. The Public and Commercial Services Union representing job centre staff, published a pamphlet this week outlining the decline in support for social security, and those who receive it. Remember the sheer spite of Peter Lilley, Tory social security secretary, in 1992 singing to his party conference a Mikado pastiche of a “little list” of people to be despised: “young ladies who get pregnant just to jump the housing queue” and “benefits offenders” making “bogus claims”. From then on the rightwing press and Benefits Street mockery set the tone of public contempt for anyone in need. Iain Duncan Smith used to send out juicy examples of benefit cheats to selected rightwing newspapers, without government figures showing fraud at just 1.1% of the benefits budget. In 2013, Ipsos Mori found that the public think £24 in every £100 is fraudulently claimed.

Politically, the mystery is why politicians got away with making things unfairer after the lid blew off top earning in the 80s. Now there’s less chance of owning a home, fewer savings, more debt and public services deteriorating. Cedric Brown, the first fat-cat shocker to catch the public eye, rewarded in 1995 for privatising British Gas with a salary of £475,000 (47 times that of his average employee), and a £600,000 incentive deal, comes from more innocent days. FTSE 100 CEOs now earn £4m.

Yet riots are extraordinarily rare – the French have always done it: it’s in their founding revolutionary DNA, and it helps to keep them less unequal than the Anglophones. Fear of revolution in cold war years kept unions strong and boardrooms wary of excess: the mid-70s, famed for union militancy, were the most equal years in British history.

This research suggests that as countries get more unequal people live in greater social isolation, locked within a narrow income group. Their friends and family share the same incomes, segregated by neighbourhood and marry similar partners. Children mix less in socially segregated schools. People no longer see over the high social fences so they don’t know how the other half lives, Mijs finds.

Ignorant of the facts, everyone wrongly places themselves on the income scale closer to the middle. Both rich and poor delude themselves they are ordinary. But telling people the facts doesn’t change their attitudes: increasingly they cling to a moral belief that people rise by merit, sinking for lack of it. Spend time talking to people using food banks or in Citizens Advice Bureaus knocked down by benefit sanctions, and too often you hear people absorbing the blame. “I should have tried harder at school,” is a frequent refrain, as if no other forces were at play. Talk to the mega-rich – I once conducted focus groups of earners up to £10m – and they are wilfully ignorant about their super-privilege, unshakable in believing their superior merit.

The right captured the story, the emotions, the moral framing: social democrats need to seize it back with a narrative of immorality that is more compelling. The British Social Attitudes survey suggests a swing back towards empathy with the swelling numbers of poor – more than £4m children. But still inheritance tax remains the most reviled of all taxes. The right forever try to prove the poor are stupider by nature than the rich, but Professor Steve Jones, celebrated geneticist, when asked about the heritability of intelligence, replies deftly that the most important heritable trait, by miles, is wealth.

The new elite’s phoney crusade to save the world – without changing anything

Today’s titans of tech and finance want to solve the world’s problems, as long as the solutions never, ever threaten their own wealth and power. by Anand Giridharadas in The Guardian 


A successful society is a progress machine. It takes in the raw material of innovations and produces broad human advancement. America’s machine is broken. The same could be said of others around the world. And now many of the people who broke the progress machine are trying to sell us their services as repairmen.

When the fruits of change have fallen on the US in recent decades, the very fortunate have basketed almost all of them. For instance, the average pretax income of the top 10th of Americans has doubled since 1980, that of the top 1% has more than tripled, and that of the top 0.001% has risen more than sevenfold – even as the average pretax income of the bottom half of Americans has stayed almost precisely the same. These familiar figures amount to three-and-a-half decades’ worth of wondrous, head-spinning change with zero impact on the average pay of 117 million Americans. Globally, over the same period, according to the World Inequality Report, the top 1% captured 27% of new income, while the bottom half of humanity – presently, more than 3 billion people – saw 12% of it. 

That vast numbers of Americans and others in the west have scarcely benefited from the age is not because of a lack of innovation, but because of social arrangements that fail to turn new stuff into better lives. For example, American scientists make the most important discoveries in medicine and genetics and publish more biomedical research than those of any other country – but the average American’s health remains worse and slower-improving than that of peers in other rich countries, and in some years life expectancy actually declines. American inventors create astonishing new ways to learn thanks to the power of video and the internet, many of them free of charge – but the average US high-school leaver tests more poorly in reading today than in 1992. The country has had a “culinary renaissance”, as one publication puts it, one farmers’ market and Whole Foods store at a time – but it has failed to improve the nutrition of most people, with the incidence of obesity and related conditions rising over time.

The tools for becoming an entrepreneur appear to be more accessible than ever, for the student who learns coding online or the Uber driver – but the share of young people who own a business has fallen by two-thirds since the 1980s. America has birthed both a wildly successful online book superstore, Amazon, and another company, Google, that has scanned more than 25m books for public use – but illiteracy has remained stubbornly in place, and the fraction of Americans who read at least one work of literature a year has dropped by almost a quarter in recent decades. The government has more data at its disposal and more ways of talking and listening to citizens – but only a quarter as many people find it trustworthy as did in the tempestuous 1960s.

Meanwhile, the opportunity to get ahead has been transformed from a shared reality to a perquisite of already being ahead. Among Americans born in 1940, those raised at the top of the upper middle class and the bottom of the lower middle class shared a roughly 90% chance of realising the so-called American dream of ending up better off than their parents. Among Americans born in 1984 and maturing into adulthood today, the new reality is split-screen. Those raised near the top of the income ladder now have a 70% chance of realising the dream. Meanwhile, those close to the bottom, more in need of elevation, have a 35% chance of climbing above their parents’ station. And it is not only progress and money that the fortunate monopolise: rich American men, who tend to live longer than the average citizens of any other country, now live 15 years longer than poor American men, who endure only as long as men in Sudan and Pakistan.

Thus many millions of Americans, on the left and right, feel one thing in common: that the game is rigged against people like them. Perhaps this is why we hear constant condemnation of “the system”, for it is the system that people expect to turn fortuitous developments into societal progress. Instead, the system – in America and across much of the world – has been organised to siphon the gains from innovation upward, such that the fortunes of the world’s billionaires now grow at more than double the pace of everyone else’s, and the top 10% of humanity have come to hold 85% of the planet’s wealth. New data published this week by Oxfam showed that the world’s 2,200 billionaires grew 12% wealthier in 2018, while the bottom half of humanity got 11% poorer. It is no wonder, given these facts, that the voting public in the US (and elsewhere) seems to have turned more resentful and suspicious in recent years, embracing populist movements on the left and right, bringing socialism and nationalism into the centre of political life in a way that once seemed unthinkable, and succumbing to all manner of conspiracy theory and fake news. There is a spreading recognition, on both sides of the ideological divide, that the system is broken, that the system has to change.

Some elites faced with this kind of gathering anger have hidden behind walls and gates and on landed estates, emerging only to try to seize even greater political power to protect themselves against the mob. (We see you, Koch brothers!) But in recent years a great many fortunate Americans have also tried something else, something both laudable and self-serving: they have tried to help by taking ownership of the problem. All around us, the winners in our highly inequitable status quo declare themselves partisans of change. They know the problem, and they want to be part of the solution. Actually, they want to lead the search for solutions. They believe their solutions deserve to be at the forefront of social change. They may join or support movements initiated by ordinary people looking to fix aspects of their society. More often, though, these elites start initiatives of their own, taking on social change as though it were just another stock in their portfolio or corporation to restructure. Because they are in charge of these attempts at social change, the attempts naturally reflect their biases.

For the most part, these initiatives are not democratic, nor do they reflect collective problem-solving or universal solutions. Rather, they favour the use of the private sector and its charitable spoils, the market way of looking at things, and the bypassing of government. They reflect a highly influential view that the winners of an unjust status quo – and the tools and mentalities and values that helped them win – are the secret to redressing the injustices. Those at greatest risk of being resented in an age of inequality are thereby recast as our saviours from an age of inequality. Socially minded financiers at Goldman Sachs seek to change the world through “win-win” initiatives such as “green bonds” and “impact investing”. Tech companies such as Uber and Airbnb cast themselves as empowering the poor by allowing them to chauffeur people around or rent out spare rooms. Management consultants and Wall Street brains seek to convince the social sector that they should guide its pursuit of greater equality by assuming board seats and leadership positions.

Conferences and ideas festivals sponsored by plutocrats and big business – such as the World Economic Forum, which is under way in Davos, Switzerland, this week – host panels on injustice and promote “thought leaders” who are willing to confine their thinking to improving lives within the faulty system rather than tackling the faults. Profitable companies built in questionable ways and employing reckless means engage in corporate social responsibility, and some rich people make a splash by “giving back” – regardless of the fact that they may have caused serious societal problems as they built their fortunes. Elite networking forums such as the Aspen Institute and the Clinton Global Initiative groom the rich to be self-appointed leaders of social change, taking on the problems people like them have been instrumental in creating or sustaining. A new breed of community-minded so-called B Corporations has been born, reflecting a faith that more enlightened corporate self-interest – rather than, say, public regulation – is the surest guarantor of the public welfare. A pair of Silicon Valley billionaires fund an initiative to rethink the Democratic party, and one of them can claim, without a hint of irony, that their goals are to amplify the voices of the powerless and reduce the political influence of rich people like them.

 

Bill Clinton and Richard Branson at a Clinton Global Initiative event in New York in 2006. Photograph: Tina Fineberg/AP

This genre of elites believes and promotes the idea that social change should be pursued principally through the free market and voluntary action, not public life and the law and the reform of the systems that people share in common; that it should be supervised by the winners of capitalism and their allies, and not be antagonistic to their needs; and that the biggest beneficiaries of the status quo should play a leading role in the status quo’s reform.
This is what I call MarketWorld – an ascendant power elite defined by the concurrent drives to do well and do good, to change the world while also profiting from the status quo. It consists of enlightened businesspeople and their collaborators in the worlds of charity, academia, media, government and thinktanks. It has its own thinkers, whom it calls “thought leaders”, its own language, and even its own territory – including a constantly shifting archipelago of conferences at which its values are reinforced and disseminated and translated into action. MarketWorld is a network and community, but it is also a culture and state of mind.

The elites of MarketWorld often speak in a language of “changing the world” and “making the world a better place” – language more typically associated with protest barricades than ski resorts. Yet we are left with the inescapable fact that even as these elites have done much to help, they have continued to hoard the overwhelming share of progress, the average American’s life has scarcely improved, and virtually all of the US’s institutions, with the exception of the military, have lost the public’s trust.

One of the towering figures in this new approach to changing the world is the former US president Bill Clinton. After leaving office in 2001, he came to champion, through his foundation and his annual Clinton Global Initiative gatherings in New York, a mode of public-private world improvement that brought together actors like Goldman Sachs, the Rockefeller Foundation and McDonald’s, sometimes with a governmental partner, to solve big problems in ways plutocrats could get on board with.

After the populist eruption that resulted in Hillary Clinton’s defeat in the 2016 US election, I asked the former president what he thought lay behind the surge of public anger. “The pain and road rage we see reflected in the election has been building a long time,” he said. He thought the anger “is being fed in part by the feeling that the most powerful people in the government, economy and society no longer care about them or look down on them. They want to become part of our progress toward shared opportunities, shared stability and shared prosperity.” But when it came to his proposed solution, it sounded a lot like the model to which he was already committed: “The only answer is to build an aggressive, creative partnership involving all levels of government, the private sector and nongovernment organisations to make it better.”

In other words, the only answer is to pursue social change outside of traditional public forums, with the political representatives of mankind as one input among several, and corporations having the big say in whether they would sponsor a given initiative or not. The public’s anger, of course, has been directed in part at the very elites he had sought to convene, on whom he had gambled his theory of post-political problem-solving, who had lost the trust of so many millions of people, making them feel betrayed, uncared for and scorned.

What people have been rejecting in the US – as well as in Britain, Hungary and elsewhere – was, in their view, rule by global elites who put the pursuit of profit above the needs of their neighbours and fellow citizens. These were elites who seemed more loyal to one another than to their own communities; elites who often showed greater interest in distant humanitarian causes than in the pain of people 10 miles to the east or west. Frustrated citizens felt they possessed no power over the spreadsheet- and PowerPoint-wielding elites commensurate with the power these elites had gained over them – whether in switching around their hours or automating their plant or quietly slipping into law a new billionaire-made curriculum for their children’s school. What they did not appreciate was the world being changed without them.

Which raises a question for all of us: are we ready to hand over our future to the plutocratic elites, one supposedly world-changing initiative at a time? Are we ready to call participatory democracy a failure, and to declare these other, private forms of change-making the new way forward? Is the decrepit state of American self-government an excuse to work around it and let it further atrophy? Or is meaningful democracy, in which we all potentially have a voice, worth fighting for?

There is no denying that today’s American elite may be among the more socially concerned elites in history. But it is also, by the cold logic of numbers, among the more predatory. By refusing to risk its way of life, by rejecting the idea that the powerful might have to sacrifice for the common good, it clings to a set of social arrangements that allow it to monopolise progress and then give symbolic scraps to the forsaken – many of whom wouldn’t need the scraps if society were working right. It is vital that we try to understand the connection between these elites’ social concern and predation, between the extraordinary helping and the extraordinary hoarding, between the milking – and perhaps abetting – of an unjust status quo and the attempts by the milkers to repair a small part of it. It is also important to understand how the elites see the world, so that we might better assess the merits and limitations of their world-changing campaigns.

There are many ways to make sense of all this elite concern and predation. One is that the elites are doing the best they can. The world is what it is, the system is what it is, the forces of the age are bigger than anyone can resist, and the most fortunate are helping. This view may allow that elite helpfulness is just a drop in the bucket, but reassures itself that at least it is something. The slightly more critical view is that this sort of change is well-meaning but inadequate. It treats symptoms, not root causes – it does not change the fundamentals of what ails us. According to this view, elites are shirking the duty of more meaningful reform.

But there is still another, darker way of judging what goes on when elites put themselves in the vanguard of social change: that doing so not only fails to make things better, but also serves to keep things as they are. After all, it takes the edge off of some of the public’s anger at being excluded from progress. It improves the image of the winners. By using private and voluntary half-measures, it crowds out public solutions that would solve problems for everyone, and do so with or without the elite’s blessing. There is no question that the outpouring of elite-led social change in our era does great good and soothes pain and saves lives. But we should also recall Oscar Wilde’s words about such elite helpfulness being “not a solution” but “an aggravation of the difficulty”. More than a century ago, in an age of churn like our own, he wrote: “Just as the worst slave-owners were those who were kind to their slaves, and so prevented the horror of the system being realised by those who suffered from it, and understood by those who contemplated it, so, in the present state of things in England, the people who do most harm are the people who try to do most good.”

 

Skid Row in downtown Los Angeles. Photograph: Frederic J Brown/AFP/Getty Images

Wilde’s formulation may sound extreme to modern ears. How can there be anything wrong with trying to do good? The answer may be: when the good is an accomplice to even greater, if more invisible, harm. In our era that harm is the concentration of money and power among a small few, who reap from that concentration a near monopoly on the benefits of change. And do-gooding pursued by elites tends not only to leave this concentration untouched, but actually to shore it up. For when elites assume leadership of social change, they are able to reshape what social change is – above all, to present it as something that should never threaten winners. In an age defined by a chasm between those who have power and those who don’t, elites have spread the idea that people must be helped, but only in market-friendly ways that do not upset fundamental power equations. Society should be changed in ways that do not change the underlying economic system that has allowed the winners to win and fostered many of the problems they seek to solve.

The broad fidelity to this law helps make sense of what we observe all around: powerful people fighting to “change the world” in ways that essentially keep it the same, and “giving back” in ways that sustain an indefensible distribution of influence, resources and tools. Is there a better way?

The secretary-general of the Organisation for Economic Co-operation and Development (OECD), a research and policy organisation that works on behalf of the world’s richest countries, has compared the prevailing elite posture to that of the fictional 19th-century Italian aristocrat Tancredi Falconeri, from Giuseppe Tomasi di Lampedusa’s novel The Leopard, who declares: “If we want things to stay as they are, things will have to change.” If this view is correct, then much of today’s charity and social innovation and buy-one-give-one marketing may not be measures of reform so much as forms of conservative self-defence – measures that protect elites from more menacing change. Among the kinds of issues being sidelined, the OECD leader wrote, are “rising inequalities of income, wealth and opportunities; the growing disconnect between finance and the real economy; mounting divergence in productivity levels between workers, firms and regions; winner-take-most dynamics in many markets; limited progressivity of our tax systems; corruption and capture of politics and institutions by vested interests; lack of transparency and participation by ordinary citizens in decision-making; the soundness of the education and of the values we transmit to future generations.” Elites, he wrote, have found myriad ways to “change things on the surface so that in practice nothing changes at all”. The people with the most to lose from genuine social change have placed themselves in charge of social change – often with the passive assent of those most in need of it.

It is fitting that an era marked by these tendencies should culminate in the election of Donald Trump. He is at once an exposer, an exploiter and an embodiment of the cult of elite-led social change. He tapped, as few before him successfully had, into a widespread intuition that elites were phonily claiming to be doing what was best for most Americans. He exploited that intuition by whipping it into frenzied anger and then directing most of that anger not at elites, but at the most marginalised and vulnerable Americans. And he came to incarnate the very fraud that had fuelled his rise, and that he had exploited. He became, like the elites he assailed, the establishment figure who falsely casts himself as a renegade. He became the rich, educated man who styles himself as the ablest protector of the poor and uneducated – and who insists, against all evidence, that his interests have nothing to do with the change he seeks. He became the chief salesman for the theory, rife among plutocratic change agents, that what is best for powerful him is best for the powerless too. Trump is the reductio ad absurdum of a culture that tasks elites with reforming the very systems that have made them and left others in the dust.

One thing that unites those who voted for Trump and those who despaired at his being elected – and the same might be said of those for and against Brexit – is a sense that the country requires transformational reform. The question we confront is whether moneyed elites, who already rule the roost in the economy and exert enormous influence in the corridors of political power, should be allowed to continue their conquest of social change and of the pursuit of greater equality. The only thing better than controlling money and power is to control the efforts to question the distribution of money and power. The only thing better than being a fox is being a fox asked to watch over hens.

What is at stake is whether the reform of our common life is led by governments elected by and accountable to the people, or rather by wealthy elites claiming to know our best interests. We must decide whether, in the name of ascendant values such as efficiency and scale, we are willing to allow democratic purpose to be usurped by private actors who often genuinely aspire to improve things but, first things first, seek to protect themselves. Yes, the American government is dysfunctional at present. But that is all the more reason to treat its repair as our foremost national priority. Pursuing workarounds of our troubled democracy makes democracy even more troubled. We must ask ourselves why we have so easily lost faith in the engines of progress that got us where we are today – in the democratic efforts to outlaw slavery, end child labour, limit the workday, keep drugs safe, protect collective bargaining, create public schools, battle the Great Depression, electrify rural America, weave a nation together by road, pursue a Great Society free of poverty, extend civil and political rights to women and African Americans and other minorities, and give our fellow citizens health, security and dignity in old age.

Much of what appears to be reform in our time is in fact the defense of stasis. When we see through the myths that foster this misperception, the path to genuine change will come into view. It will once again be possible to improve the world without permission slips from the powerful.

The George Soros philosophy – and its fatal flaw

Daniel Bessner in The Guardian


In late May, the same day she got fired by the US TV network ABC for her racist tweet about Obama adviser Valerie Jarrett, Roseanne Barr accused Chelsea Clinton of being married to George Soros’s nephew. “Chelsea Soros Clinton,” Barr tweeted, knowing that the combination of names was enough to provoke a reaction. In the desultory exchange that followed, the youngest Clinton responded to Roseanne by praising Soros’s philanthropic work with his Open Society Foundations. To which Barr responded in the most depressing way possible, repeating false claims earlier proferred by rightwing media personalities: “Sorry to have tweeted incorrect info about you! Please forgive me! By the way, George Soros is a nazi who turned in his fellow Jews 2 be murdered in German concentration camps & stole their wealth – were you aware of that? But, we all make mistakes, right Chelsea?”

Barr’s tweet was quickly retweeted by conservatives, including Donald Trump Jr. This shouldn’t have surprised anyone. On the radical right, Soros is as hated as the Clintons. He is a verbal tic, a key that fits every hole. Soros’s name evokes “an emotional outcry from the red-meat crowds”, one former Republican congressman recently told the Washington Post. They view him as a “sort of sinister [person who] plays in the shadows”. This antisemitic caricature of Soros has dogged the philanthropist for decades. But in recent years the caricature has evolved into something that more closely resembles a James Bond villain. Even to conservatives who reject the darkest fringes of the far right, Breitbart’s description of Soros as a “globalist billionaire” dedicated to making America a liberal wasteland is uncontroversial common sense.

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The trouble with charitable billionaires

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In spite of the obsession with Soros, there has been surprisingly little interest in what he actually thinks. Yet unlike most of the members of the billionaire class, who speak in platitudes and remain withdrawn from serious engagement with civic life, Soros is an intellectual. And the person who emerges from his books and many articles is not an out-of-touch plutocrat, but a provocative and consistent thinker committed to pushing the world in a cosmopolitan direction in which racism, income inequality, American empire, and the alienations of contemporary capitalism would be things of the past. He is extremely perceptive about the limits of markets and US power in both domestic and international contexts. He is, in short, among the best the meritocracy has produced.

It is for this reason that Soros’s failures are so telling; they are the failures not merely of one man, but of an entire class – and an entire way of understanding the world. From his earliest days as a banker in postwar London, Soros believed in a necessary connection between capitalism and cosmopolitanism. For him, as for most of the members of his cohort and the majority of the Democratic party’s leadership, a free society depends on free (albeit regulated) markets. But this assumed connection has proven to be a false one. The decades since the end of the cold war have demonstrated that, without a perceived existential enemy, capitalism tends to undermine the very culture of trust, compassion and empathy upon which Soros’s “open society” depends, by concentrating wealth in the hands of the very few.

Instead of the global capitalist utopia predicted in the halcyon 1990s by those who proclaimed an end to history, the US is presently ruled by an oafish heir who enriches his family as he dismantles the “liberal international order” that was supposed to govern a peaceful, prosperous and united world. While Soros recognised earlier than most the limits of hypercapitalism, his class position made him unable to advocate the root-and-branch reforms necessary to bring about the world he desires. The system that allows George Soros to accrue the wealth that he has done has proven to be one in which cosmopolitanism will never find a stable home.

The highlights of Soros’s biography are well known. Born to middle-class Jewish parents in Budapest in 1930 as György Schwartz, Soros – his father changed the family name in 1936 to avoid antisemitic discrimination – had a tranquil childhood until the second world war, when after the Nazi invasion of Hungary he and his family were forced to assume Christian identities and live under false names. Miraculously, Soros and his family survived the war, escaping the fate suffered by more than two-thirds of Hungary’s Jews. Feeling stifled in newly communist Hungary, in 1947 Soros immigrated to the UK, where he studied at the London School of Economics and got to know the Austrian-born philosopher Karl Popper, who became his greatest interlocutor and central intellectual influence.

In 1956, Soros moved to New York to pursue a career in finance. After spending over a decade working in various Wall Street positions, in the late 1960s he founded the Quantum Fund, which became one of the most successful hedge funds of all time. As his fund amassed staggering profits, Soros personally emerged as a legendary trader; most famously, in November 1992 he earned more than $1bn and “broke the Bank of England” by betting that the pound was priced too highly against the Deutschmark.

Karl Popper, whose writings were a key influence on Soros’s thinking about the ‘open society’. Photograph: Popperfoto

Today, Soros is one of the richest men in the world and, along with Bill Gates and Mark Zuckerberg, one of the US’s most politically influential philanthropists. But unlike Gates and Zuckerberg, Soros has long pointed to academic philosophy as his source of inspiration. Soros’s thought and philanthropic career are organised around the idea of the “open society,” a term developed and popularised by Popper in his classic work The Open Society and Its Enemies. According to Popper, open societies guarantee and protect rational exchange, while closed societies force people to submit to authority, whether that authority is religious, political or economic.

Since 1987, Soros has published 14 books and a number of pieces in the New York Review of Books, New York Times and elsewhere. These texts make it clear that, like many on the centre-left who rose to prominence in the 1990s, Soros’s defining intellectual principle is his internationalism. For Soros, the goal of contemporary human existence is to establish a world defined not by sovereign states, but by a global community whose constituents understand that everyone shares an interest in freedom, equality and prosperity. In his opinion, the creation of such a global open society is the only way to ensure that humanity overcomes the existential challenges of climate change and nuclear proliferation.
Unlike Gates, whose philanthropy focuses mostly on ameliorative projects such as eradicating malaria, Soros truly wants to transform national and international politics and society. Whether or not his vision can survive the wave of antisemitic, Islamophobic and xenophobic rightwing nationalism ascendant in the US and Europe remains to be seen. What is certain is that Soros will spend the remainder of his life attempting to make sure it does.

Soros began his philanthropic activities in 1979, when he “determined after some reflection that I had enough money” and could therefore devote himself to making the world a better place. To do so, he established the Open Society Fund, which quickly became a transnational network of foundations. Though he made some effort at funding academic scholarships for black students in apartheid South Africa, Soros’s primary concern was the communist bloc in eastern Europe; by the end of the 80s, he had opened foundation offices in Hungary, Poland, Czechoslovakia, Bulgaria and the Soviet Union itself. Like Popper before him, Soros considered the countries of communist eastern Europe to be the ultimate models of closed societies. If he were able to open these regimes, he could demonstrate to the world that money could – in some instances, at least – peacefully overcome oppression without necessitating military intervention or political subversion, the favoured tools of cold war leaders.

Soros set up his first foreign foundation in Hungary in 1984, and his efforts there serve as a model of his activities during this period. Over the course of the decade, he awarded scholarships to Hungarian intellectuals to bring them to the US; provided Xerox machines to libraries and universities; and offered grants to theatres, libraries, intellectuals, artists and experimental schools. In his 1990 book Opening the Soviet System, Soros wrote that he believed his foundation had helped “demolish the monopoly of dogma [in Hungary] by making an alternate source of financing available for cultural and social activities”, which, in his estimation, played a crucial role in producing the internal collapse of communism.

Soros’s use of the word dogma points to two critical elements of his thought: his fierce belief that ideas, more than economics, shape life, and his confidence in humanity’s capacity for progress. According to Soros, the dogmatic mode of thinking that characterised closed societies made it impossible for them to accommodate to the changing vicissitudes of history. Instead, “as actual conditions change”, people in closed societies were forced to abide by an atavistic ideology that was increasingly unpersuasive. When this dogma finally became too obviously disconnected from reality, Soros claimed, a revolution that overturned the closed society usually occurred. By contrast, open societies were dynamic and able to correct course whenever their dogmas strayed too far from reality.

As he witnessed the Soviet empire’s downfall between 1989 and 1991, Soros needed to answer a crucial strategic question: now that the closed societies of eastern Europe were opening, what was his foundation to do? On the eve of the Soviet Union’s dissolution, Soros published an updated version of Opening the Soviet System, titled Underwriting Democracy, which revealed his new strategy: he would dedicate himself to building permanent institutions that would sustain the ideas that motivated anticommunist revolutions, while modelling the practices of open society for the liberated peoples of eastern Europe. The most important of these was Central European University (CEU), which opened in Budapest in 1991. Funded by Soros, CEU was intended to serve as the wellspring for a new, transnational, European world – and the training ground for a new, transnational, European elite.

 

An activist removing an anti-Soros poster in Budapest, Hungary. Photograph: Bernadett Szabo/Reuters

How could Soros ensure that newly opened societies would remain free? Soros had come of age in the era of the Marshall Plan, and experienced American largesse firsthand in postwar London. To him, this experience showed that weakened and exhausted societies could not be rehabilitated without a substantial investment of foreign aid, which would alleviate extreme conditions and provide the minimum material base that would enable the right ideas about democracy and capitalism to flourish.

For this reason, in the late 80s and early 90s Soros repeatedly argued that “only the deus ex machina of western assistance” could make the eastern bloc permanently democratic. “People who have been living in a totalitarian system all their lives,” he claimed, “need outside assistance to turn their aspirations into reality.” Soros insisted that the US and western Europe give the countries of eastern Europe a substantial amount of pecuniary aid, provide them with access to the European Common Market, and promote cultural and educational ties between the west and the east “that befit a pluralistic society”. Once accomplished, Soros avowed, western Europe must welcome eastern Europe into the European community, which would prevent the continent’s future repartitioning.

Soros’s prescient pleas went unheeded. From the 1990s on, he has attributed the emergence of kleptocracy and hypernationalism in the former eastern bloc to the west’s lack of vision and political will during this crucial moment. “Democracies,” he lamented in 1995, seem to “suffer from a deficiency of values … [and] are notoriously unwilling to take any pain when their vital self-interests are not directly threatened.” For Soros, the west had failed in an epochal task, and in so doing had revealed its shortsightedness and fecklessness.

But it was more than a lack of political will that constrained the west during this moment. In the era of “shock therapy”, western capital did flock to eastern Europe – but this capital was invested mostly in private industry, as opposed to democratic institutions or grassroots community-building, which helped the kleptocrats and anti-democrats seize and maintain power. Soros had identified a key problem but was unable to appreciate how the very logic of capitalism, which stressed profit above all, would necessarily undermine his democratic project. He remained too wedded to the system he had conquered.

In the wake of the cold war, Soros dedicated himself to exploring the international problems that prevented the realisation of a global open society. After the 1997 Asian financial crisis, in which a currency collapse in south-east Asia engendered a world economic downturn, Soros wrote books addressing the two major threats he believed beset open society: hyperglobalisation and market fundamentalism, both of which had become hegemonic after communism’s collapse.

Soros argued that the history of the post-cold war world, as well as his personal experiences as one of international finance’s most successful traders, demonstrated that unregulated global capitalism undermined open society in three distinct ways. First, because capital could move anywhere to avoid taxation, western nations were deprived of the finances they needed to provide citizens with public goods. Second, because international lenders were not subject to much regulation, they often engaged in “unsound lending practices” that threatened financial stability. Finally, because these realities increased domestic and international inequality, Soros feared they would encourage people to commit unspecified “acts of desperation” that could damage the global system’s viability.

Soros saw, far earlier than most of his fellow centre-leftists, the problems at the heart of the financialised and deregulated “new economy” of the 1990s and 2000s. More than any of his liberal peers, he recognised that embracing the most extreme forms of its capitalist ideology might lead the US to promote policies and practices that undermined its democracy and threatened stability both at home and abroad.

In Soros’s opinion, the only way to save capitalism from itself was to establish a “global system of political decision-making” that heavily regulated international finance. Yet as early as 1998, Soros acknowledged that the US was the primary opponent of global institutions; by this point in time, Americans had refused to join the International Court of Justice; had declined to sign the Ottawa treaty on banning landmines; and had unilaterally imposed economic sanctions when and where they saw fit. Still, Soros hoped that, somehow, American policymakers would accept that, for their own best interests, they needed to lead a coalition of democracies dedicated to “promoting the development of open societies [and] strengthening international law and the institutions needed for a global open society”.

But Soros had no programme for how to modify American elites’ increasing hostility to forms of internationalism that did not serve their own military might or provide them with direct and visible economic benefits. This was a significant gap in Soros’s thought, especially given his insistence on the primacy of ideas in engendering historical change. Instead of thinking through this problem, however, he simply declared that “change would have to begin with a change of attitudes, which would be gradually translated into a change of policies”. Soros’s status as a member of the hyper-elite and his belief that, for all its hiccups, history was headed in the right direction made him unable to consider fully the ideological obstacles that stood in the way of his internationalism.

The George W Bush administration’s militarist response to the attacks of September 11 compelled Soros to shift his attention from economics to politics. Everything about the Bush administration’s ideology was anathema to Soros. As Soros declared in his 2004 The Bubble of American Supremacy, Bush and his coterie embraced “a crude form of social Darwinism” that assumed that “life is a struggle for survival, and we must rely mainly on the use of force to survive”. Whereas before September 11, “the excesses of [this] false ideology were kept within bounds by the normal functioning of our democracy”, after it Bush “deliberately fostered the fear that has gripped the country” to silence opposition and win support for a counterproductive policy of militaristic unilateralism. To Soros, assertions such as “either you are with us, or you are with the terrorists” eerily echoed the rhetoric of the Nazis and Soviets, which he hoped to have left behind in Europe. Soros worried, wisely, that Bush would lead the nation into “a permanent state of war” characterised by foreign intervention and domestic oppression. The president was thus not only a threat to world peace, but also to the very idea of open society.

Nevertheless, Soros was confident that Bush’s “extremist ideology” did not correspond “to the beliefs and values of the majority of Americans”, and he expected that John Kerry would win the 2004 presidential election. Kerry’s victory, Soros anticipated, would spur “a profound reconsideration of America’s role in the world” that would lead citizens to reject unilateralism and embrace international cooperation.

But Kerry did not win, which forced the philanthropist to question, for the first time, ordinary Americans’ political acumen. After the 2004 election, Soros underwent something like a crisis of faith. In his 2006 book The Age of Fallibility, Soros attributed Bush’s re-election to the fact that the US was “a ‘feel-good’ society unwilling to face unpleasant reality”. Americans, Soros avowed, would rather be “grievously misled by the Bush administration” than confront the failures of Afghanistan, Iraq and the war on terror head-on. Because they were influenced by market fundamentalism and its obsession with “success”, Soros continued, Americans were eager to accept politicians’ claims that the nation could win something as absurd as a war on terror.

Bush’s victory convinced Soros that the US would survive as an open society only if Americans began to acknowledge “that the truth matters”; otherwise, they would continue to support the war on terror and its concomitant horrors. How Soros could change American minds, though, remained unclear.

The financial crisis of 2007-2008 encouraged Soros to refocus on economics. The collapse did not surprise him; he considered it the predictable consequence of market fundamentalism. Rather, it convinced him that the world was about to witness, as he declared in his 2008 book The New Paradigm for Financial Markets, “the end of a long period of relative stability based on the US as the dominant power and the dollar as the main international reserve currency”.

Anticipating American decline, Soros started to place his hopes for a global open society on the European Union, despite his earlier anger at the union’s members for failing to fully welcome eastern Europe in the 90s. Though he admitted that the EU had serious problems, it was nevertheless an organisation in which nations voluntarily “agreed to a limited delegation of sovereignty” for the common European good. It thus provided a regional model for a world order based on the principles of open society.

Soros’s hopes in the EU, however, were quickly dashed by three crises that undercut the union’s stability: the ever-deepening international recession, the refugee crisis, and Vladimir Putin’s revanchist assault on norms and international law. While Soros believed western nations could theoretically mitigate these crises, he concluded that, in a repetition of the failures of the post-Soviet period, they were unlikely to band together to do so. In the last 10 years, Soros has been disappointed by the facts that the west refused to forgive Greece’s debt; failed to develop a common refugee policy; and would not consider augmenting sanctions on Russia with the material and financial support Ukraine required to defend itself after Putin’s 2014 annexation of Crimea. He was further disturbed that many nations in the EU, from the UK to Poland, witnessed the re-emergence of a rightwing ethnonationalism thought lost to history. Once Britain voted to leave the union in 2016, he became convinced that “the disintegration of the EU [was] practically irreversible”. The EU did not serve as the model Soros hoped it would.

 

Hungarian prime minister Viktor Orban in parliament for a vote on the ‘Stop Soros’ anti-immigration laws that he introduced. Photograph: Tamas Kaszas/Reuters

Soros experienced firsthand the racialised authoritarianism that in the last decade has threatened not only the EU, but democracy in Europe generally. Since 2010, the philanthropist has repeatedly sparred with Viktor Orbán, the authoritarian, anti-immigrant prime minister of Hungary. Recently, Soros accused Orbán of “trying to re-establish the kind of sham democracy that prevailed [in Hungary] in the period between the first and second world wars”. In his successful re-election campaign earlier this year, Orbán spent much of his time on the campaign trail demonising Soros, playing on antisemitic tropes and claiming that Soros was secretly plotting to send millions of immigrants to Hungary. Orbán has also threatened the Central European University – which his government derisively refers to as “the Soros university” – with closure, and last month parliament passed new anti-immigration legislation known as the “Stop Soros” laws.

But while Orbán threatens Hungary’s open society, it is Donald Trump who threatens the open society writ large. Soros has attributed Trump’s victory to the deleterious effects market fundamentalism and the Great Recession had on American society. In a December 2016 op-ed, Soros argued that Americans voted for Trump, “a con artist and would-be dictator”, because “elected leaders failed to meet voters’ legitimate expectations and aspirations [and] this failure led electorates to become disenchanted with the prevailing versions of democracy and capitalism”.

Instead of fairly distributing the wealth created by globalisation, Soros argued, capitalism’s “winners” failed to “compensate the losers”, which led to a drastic increase in domestic inequality – and anger. Though Soros believed that the US’s “Constitution and institutions … are strong enough to resist the excesses of the executive branch”, he worried that Trump would form alliances with Putin, Orbán and other authoritarians, which would make it near-impossible to build a global open society. In Hungary, the US and many of the parts of the world that have attracted Soros’s attention and investment, it is clear that his project has stalled.

Soros’s path ahead is unclear. On one hand, some of Soros’s latest actions suggest he has moved in a left-wing direction, particularly in the areas of criminal justice reform and refugee aid. He recently created a fund to assist the campaign of Larry Krasner, the radical Philadelphia district attorney, and backed three California district-attorney candidates similarly devoted to prosecutorial reform. He has also invested $500m to alleviate the global refugee crisis.

On the other hand, some of his behaviour indicates that Soros remains committed to a traditional Democratic party ill-equipped to address the problems that define our moment of crisis. During the 2016 Democratic primary race, he was an avowed supporter of Hillary Clinton. And recently, he lambasted potential Democratic presidential candidate Kirsten Gillibrand for urging Al Franken to resign due to his sexual harassment of the radio host Leeann Tweeden. If Soros continues to fund truly progressive projects, he will make a substantial contribution to the open society; but if he decides to defend banal Democrats, he will contribute to the ongoing degradation of American public life.

Throughout his career, Soros has made a number of wise and exciting interventions. From a democratic perspective, though, this single wealthy person’s ability to shape public affairs is catastrophic. Soros himself has recognised that “the connection between capitalism and democracy is tenuous at best”. The problem for billionaires like him is what they do with this information. The open society envisions a world in which everyone recognises each other’s humanity and engages each other as equals. If most people are scraping for the last pieces of an ever-shrinking pie, however, it is difficult to imagine how we can build the world in which Soros – and, indeed, many of us – would wish to live. Presently, Soros’s cosmopolitan dreams remain exactly that. The question is why, and the answer might very well be that the open society is only possible in a world where no one – whether Soros, or Gates, or DeVos, or Zuckerberg, or Buffett, or Musk, or Bezos – is allowed to become as rich as he has.

The trouble with charitable billionaires

More and more wealthy CEOs are pledging to give away parts of their fortunes – often to help fix problems their companies caused. Some call this ‘philanthrocapitalism’, but is it just corporate hypocrisy? By Carl Rhodes and Peter Bloom in The Guardian


In February 2017, Facebook’s founder and CEO Mark Zuckerberg was in the headlines for his charitable activities. The Chan Zuckerberg Initiative, founded by the tech billionaire and his wife, Priscilla Chan, handed out over $3m in grants to aid the housing crisis in the Silicon Valley area. David Plouffe, the Initiative’s president of policy and advocacy, stated that the grants were intended to “support those working to help families in immediate crisis while supporting research into new ideas to find a long-term solution – a two-step strategy that will guide much of our policy and advocacy work moving forward”.

This is but one small part of Zuckerberg’s charity empire. The Initiative has committed billions of dollars to philanthropic projects designed to address social problems, with a special focus on solutions driven by science, medical research and education. This all took off in December 2015, when Zuckerberg and Chan wrote and published a letter to their new baby Max. The letter made a commitment that over the course of their lives they would donate 99% of their shares in Facebook (at the time valued at $45bn) to the “mission” of “advancing human potential and promoting equality”.

The housing intervention is of course much closer to home, dealing with issues literally at the door of Facebook’s Menlo Park head office. This is an area where median house prices almost doubled to around $2m in the five years between 2012 and 2017.

More generally, San Francisco is a city with massive income inequality, and the reputation of having the most expensive housing in the US. Chan Zuckerberg’s intervention was clearly designed to offset social and economic problems caused by rents and house prices having skyrocketed to such a level that even tech workers on six-figure salaries find it hard to get by. For those on more modest incomes, supporting themselves, let alone a family, is nigh-on impossible.

Ironically, the boom in the tech industry in this region – a boom Facebook has been at the forefront of – has been a major contributor to the crisis. As Peter Cohen from the Council of Community Housing Organizations explained it: “When you’re dealing with this total concentration of wealth and this absurd slosh of real-estate money, you’re not dealing with housing that’s serving a growing population. You’re dealing with housing as a real-estate commodity for speculation.”

Zuckerberg’s apparent generosity, it would seem, is a small contribution to a large problem that was created by the success of the industry he is involved in. In one sense, the housing grants (equivalent to the price of just one-and-a-half average Menlo Park homes) are trying to put a sticking plaster on a problem that Facebook and other Bay Area corporations aided and abetted. It would appear that Zuckerberg was redirecting a fraction of the spoils of neoliberal tech capitalism, in the name of generosity, to try to address the problems of wealth inequality created by a social and economic system that allowed those spoils to accrue in the first place.

It is easy to think of Zuckerberg as some kind of CEO hero – a once regular kid whose genius made him one of the richest men in the world, and who decided to use that wealth for the benefit of others. The image he projects is of altruism untainted by self-interest. A quick scratch of the surface reveals that the structure of Zuckerberg’s charity enterprise is informed by much more than good-hearted altruism. Even while many have applauded Zuckerberg for his generosity, the nature of this apparent charity was openly questioned from the outset.

The wording of Zuckerberg’s 2015 letter could easily have been interpreted as meaning that he was intending to donate $45bn to charity. As investigative reporter Jesse Eisinger reported at the time, the Chan Zuckerberg Initiative through which this giving was to be funnelled is not a not-for-profit charitable foundation, but a limited liability company. This legal status has significant practical implications, especially when it comes to tax. As a company, the Initiative can do much more than charitable activity: its legal status gives it rights to invest in other companies, and to make political donations. Effectively the company does not restrict Zuckerberg’s decision-making as to what he wants to do with his money; he is very much the boss. Moreover, as Eisinger described it, Zuckerberg’s bold move yielded a huge return on investment in terms of public relations for Facebook, even though it appeared that he simply “moved money from one pocket to the other” while being “likely never to pay any taxes on it”.

The creation of the Chan Zuckerberg Initiative – decidedly not a charity organisation – means that Zuckerberg can control the company’s investments as he sees fit, while accruing significant commercial, tax and political benefits. All of this is not to say that Zuckerberg’s motives do not include some expression of his own generosity or some genuine desire for humanity’s wellbeing and equality.

What it does suggest, however, is that when it comes to giving, the CEO approach is one in which there is no apparent incompatibility between being generous, seeking to retain control over what is given, and the expectation of reaping benefits in return. This reformulation of generosity – in which it is no longer considered incompatible with control and self-interest – is a hallmark of the “CEO society”: a society where the values associated with corporate leadership are applied to all dimensions of human endeavour.

Mark Zuckerberg was by no means the first contemporary CEO to promise and initiate large-scale donations of wealth to self-nominated good causes. In the CEO society it is positively a badge of honour for the world’s most wealthy businesspeople to create vehicles to give away their wealth. This has been institutionalised in what is known as The Giving Pledge, a philanthropy campaign initiated by Warren Buffett and Bill Gates in 2010. The campaign targets billionaires around the world, encouraging them to give away the majority of their wealth. There is nothing in the pledge that specifies what exactly the donations will be used for, or even whether they are to be made now or willed after death; it is just a general commitment to using private wealth for ostensibly public good. It is not legally binding either, but a moral commitment.

There is a long list of people and families who have made the pledge. Mark Zuckerberg and Priscilla Chan are there, and so are some 174 others, including household names such as Richard and Joan Branson, Michael Bloomberg, Barron Hilton and David Rockefeller. It would seem that many of the world’s richest people simply want to give their money away to good causes. This all amounts to what human geographers Iain Hay and Samantha Muller sceptically refer to as a “golden age of philanthropy”, in which, since the late 1990s, bequests to charity from the super-rich have escalated to the hundreds of billions of dollars. These new philanthropists bring to charity an “entrepreneurial disposition”, Hay and Muller wrote in a 2014 paper, yet one that they suggest has been “diverting attention and resources away from the failings of contemporary manifestations of capitalism”, and may also be serving as a substitute for public spending withdrawn by the state.

 

Warren Buffett announces a $30bn donation to the Bill and Melinda Gates Foundation, 2006. Photograph: Justin Lane/EPA

Essentially, what we are witnessing is the transfer of responsibility for public goods and services from democratic institutions to the wealthy, to be administered by an executive class. In the CEO society, the exercise of social responsibilities is no longer debated in terms of whether corporations should or shouldn’t be responsible for more than their own business interests. Instead, it is about how philanthropy can be used to reinforce a politico-economic system that enables such a small number of people to accumulate obscene amounts of wealth. Zuckerberg’s investment in solutions to the Bay Area housing crisis is an example of this broader trend.

The reliance on billionaire businesspeople’s charity to support public projects is a part of what has been called “philanthrocapitalism”. This resolves the apparent antinomy between charity (traditionally focused on giving) and capitalism (based on the pursuit of economic self-interest). As historian Mikkel Thorup explains, philanthrocapitalism rests on the claim that “capitalist mechanisms are superior to all others (especially the state) when it comes to not only creating economic but also human progress, and that the market and market actors are or should be made the prime creators of the good society”.

The golden age of philanthropy is not just about benefits that accrue to individual givers. More broadly, philanthropy serves to legitimise capitalism, as well as to extend it further and further into all domains of social, cultural and political activity.

Philanthrocapitalism is about much more than the simple act of generosity it pretends to be, instead involving the inculcation of neoliberal values personified by the billionaire CEOs who have led its charge. Philanthropy is recast in the same terms in which a CEO would consider a business venture. Charitable giving is translated into a business model that employs market-based solutions characterised by efficiency and quantified costs and benefits.

Philanthrocapitalism takes the application of management discourses and practices from business corporations and adapts them to charitable work. The focus is on entrepreneurship, market-based approaches and performance metrics. The process is funded by super-rich businesspeople and managed by those experienced in business. The result, at a practical level, is that philanthropy is undertaken by CEOs in a manner similar to how they would run businesses.

As part of this, charitable foundations have changed in recent years. As explained in a paper by Garry Jenkins, a professor of law at the University of Minnesota, this involves becoming “increasingly directive, controlling, metric-focused and business-oriented with respect to their interactions with grantee public charities, in an attempt to demonstrate that the work of the foundation is ‘strategic’ and ‘accountable’”.

This is far from the benign shift to a different and better way of doing things that it claims to be – a CEO style to “save the world through business thinking and market methods”, as Jenkins puts it. Instead, the risk of philanthrocapitalism is a takeover of charity by business interests, such that generosity to others is appropriated into the overarching dominance of the CEO model of society and its corporate institutions.

The modern CEO is very much at the forefront of the political and media stage. While this often leads to CEOs becoming vaunted celebrities, it also leaves them open to being identified as scapegoats for economic injustice. The increasingly public role taken by CEOs is related to a renewed corporate focus on their wider social responsibility. Firms must now balance, at least rhetorically, a dual commitment to profit and social outcomes. This has been reflected in the promotion of the “triple bottom line”, which combines social, financial and environmental priorities in corporate reporting.

This turn toward social responsibility represents a distinct problem for CEOs. While firms may be willing to sacrifice some short-term profit for the sake of preserving their public reputation, this same bargain is rarely on offer to CEOs themselves, who are judged on their quarterly reports and how well they are serving the fiscal interests of their shareholders. Thus, whereas social responsibility strategies may win public kudos, in the confines of the boardroom it is often a different story, especially when the budget is being scrutinised.

There is a further economic incentive for CEOs to avoid making fundamental changes to their operations in the name of social justice, in that a large portion of CEO remuneration often consists of company stock and options. Accepting fair trade policies and closing sweatshops may be good for the world, but is potentially disastrous for a firm’s immediate financial success. What is ethically valuable to the voting and buying public is not necessarily of concrete value to corporations, nor personally beneficial to their top executives.

Many firms have sought to resolve this contradiction through high-profile philanthropy. Exploitative labour practices or corporate malpractice are swept under the carpet as companies publicise tax-efficient contributions to good causes. Such contributions may be a relatively small price to pay compared with changing fundamental operational practices. Likewise, giving to charity is a prime opportunity for CEOs to be seen to be doing good without having to sacrifice their commitment to making profit at any social cost. Charitable activity permits CEOs to be philanthropic rather than economically progressive or politically democratic.

There is an even more straightforward financial consideration at play in some cases. Charity can be an absolute boon to capital accumulation: corporate philanthropy has been shown to have a positive effect on perceptions by stock market analysts. At the personal level, CEOs can take advantage of promoting their individual charity to distract from other, less savoury activities; as an executive, they can cash in on the capital gains that can be made from introducing high-profile charity strategies.

The very notion of corporate social responsibility, or CSR, has been criticised for providing companies with a moral cover to act in quite exploitative and socially damaging ways. But in the current era, social responsibility, when portrayed as an individual character trait of chief executives, has allowed corporations to be run as irresponsibly as ever. CEOs’ very public engagement in philanthrocapitalism can be understood as a key component of this reputation management. It is part of the marketing of the firm itself, as the good deeds of its leaders come to signify the overall goodness of the corporation.

Ironically, philanthrocapitalism also grants corporations the moral right, at least within the public consciousness, to be socially irresponsible. The trumpeting of the CEOs’ personal generosity can grant an implicit right for their corporations to act ruthlessly and with little consideration for the broader social effects of their activities. This reflects a productive tension at the heart of modern CSR: the more moral a CEO, the more immoral their company can in theory seek to be.

The hypocrisy revealed by CEOs claiming to be dedicated to social responsibility and charity also exposes a deeper authoritarian morality that prevails in the CEO society. Philanthrocapitalism is commonly presented as the social justice component of an otherwise amoral global free market. At best, corporate charity is a type of voluntary tax paid by the 1% for their role in creating such an economically deprived and unequal world. Yet this “giving” culture also helps support and spread a distinctly authoritarian form of economic development that mirrors the autocratic leadership style of the executives who predominantly fund it.

The marketisation of global charity and empowerment has dangerous implications that transcend economics. It also has a troubling emerging political legacy, one in which democracy is sacrificed on that altar of executive-style empowerment. Politically, the free market is posited as a fundamental requirement for liberal democracy. However, recent analysis reveals the deeper connection between processes of marketisation and authoritarianism. In particular, a strong government is required to implement these often unpopular market changes. The image of the powerful autocrat is, to this effect, transformed into a potentially positive figure, a forward-thinking political leader who can guide their country on the correct market path in the face of “irrational” opposition. Charity becomes a conduit for CEOs to fund these “good” authoritarians.

A protester outside the Nasdaq headquarters in New York marks Facebook’s IPO, 2012. Photograph: Alamy Stock Photo

The recent development of philanthrocapitalism also marks the increasing encroachment of business into the provision of public goods and services. This encroachment is not limited to the activities of individual billionaires; it is also becoming a part of the activities of large corporations under the rubric of CSR. This is especially the case for large multinational corporations whose global reach, wealth and power give them significant political clout. This relationship has been referred to as “political CSR”. Business ethics professors Andreas Scherer and Guido Palazzo note that, for large corporations, “CSR is increasingly displayed in corporate involvement in the political process of solving societal problems, often on a global scale”. Such political CSR initiatives see organisations cooperating and collaborating with governments, civic bodies and international institutions, so that historical separations between the purposes of the state and the corporations are increasingly eroded.

Global corporations have long been involved in quasi-governmental activities such as the setting of standards and codes, and today are increasingly engaging in other activities that have traditionally been the domain of government, such as public health provision, education, the protection of human rights, addressing social problems such as Aids and malnutrition, protection of the natural environment and the promotion of peace and social stability.

Today, large organisations can amass significant economic and political power, on a global scale. This means that their actions – and the way those actions are regulated – have far-reaching social consequences. The balanced tipped in 2000, when the Institute for Policy Studies in the US reported, after comparing corporate revenues with gross domestic product (GDP), that 51 of the largest economies in the world were corporations, and 49 were national economies. The biggest corporations were General Motors, Walmart and Ford, each of which was larger economically than Poland, Norway and South Africa. As the heads of these corporations, CEOs are now quasi-politicians. One only has to think of the increasing power of the World Economic Forum, whose annual meeting in Davos in Switzerland sees corporate CEOs and senior politicians getting together with the ostensible goal of “improving the world”, a now time-honoured ritual that symbolises the global power and agency of CEOs.

The development of CSR is not the result of self-directed corporate initiatives for doing good deeds, but a response to widespread CSR activism from NGOs, pressure groups and trade unions. Often this has been in response to the failure of governments to regulate large corporations. High-profile industrial accidents and scandals have also put pressure on organisations for heightened self-regulation.

An explosion at a Union Carbide chemical plant in Bhopal, India in 1984 led to the deaths of an estimated 25,000 people. James Post, a professor of management at Boston University, explains that, after the disaster, “the global chemical industry recognised that it was nearly impossible to secure a licence to operate without public confidence in industry safety standards. The Chemical Manufacturers Association (CMA) adopted a code of conduct, including new standards of product stewardship, disclosure and community engagement.”

The impetus for this was corporate self-interest, rather than generosity, as industries and corporations globally “began to recognise the increasing importance of reputation and image”. Similar moves were enacted after other major industrial accidents, such as the Exxon Valdez oil tanker spilling hundreds of thousands of barrels of oil in Alaska in 1989, and BP’s Deepwater Horizon oil rig exploding in the Gulf of Mexico in 2010.

 

The Deepwater Horizon oil rig ablaze in the Gulf of Mexico, April 2010.
Photograph: Handout/Getty Images

Another important case was the involvement of the clothing companies Gap and Nike in a child labour scandal after the broadcast of a BBC Panorama documentary in October 2000. Factories in Cambodia making Gap and Nike clothing were shown to operate with terrible working conditions, involving children as young as 12 working seven days a week, being forced to do overtime, and enduring physical and emotional abuse from management. The public outcry that ensued demanded that Gap and Nike, and other organisations like them, take more responsibility for the negative human social impacts of their business practices.

CSR was introduced in order to reduce the ill effects of corporate self-interest. But over time it has turned into a means for further enhancing that self-interest while ostensibly claiming to be addressing the interests of others. When facing the threat of corporate scandal, CSR is seen as the vehicle through which corporate reputation can be boosted, and the threat of government regulation can be mitigated. Again, here we see how corporations engage in seemingly responsible practices in order to increase their own political power, and to diminish the power of nation states over their own operations.

The idea that organisations adopt CSR for the purposes of developing or defending a corporate reputation has put the ethics of CSR under scrutiny. The contention has arisen that, rather than using CSR as a means of “being good”, corporations adopt it merely as a means of “looking good”, while not in any way questioning their basic ethical or political stance. Even Enron, before its legendary fraud scandal and eventual demise in 2001, was well known for its advocacy of social responsibility.

CEO generosity is epic in proportions – or at least that is how it is portrayed. Indeed, on an individual level it is hard to find fault with those rich people who have given away vast swaths of their wealth to charitable causes, or those corporations that champion socially responsible programmes. But what CSR and philanthrocapitalism achieve more broadly is the social justification of extreme wealth inequality, rather than any kind of antidote to it. We need to note here that, despite the apparent proliferation of giving promised by philanthrocapitalism, the so-called golden age of philanthropy is also an age of expanding inequality.

This is clearly spelled out a 2017 report by Oxfam called An Economy for the 99%. It highlights the injustice and unsustainability of a world suffering from widening levels of inequality: since the early 1990s, the top 1% of the world’s wealthy people have gained more income than the entire bottom 50%. Why so? Oxfam’s report places the blame firmly with corporations and the global market economies in which they operate. The statistics are alarming, with the world’s 10 biggest corporations having revenues that exceed the total combined revenues of the 180 least wealthy nations. Corporate social responsibility is not making any real difference. The report states: “When corporations increasingly work for the rich, the benefits of economic growth are denied to those who need them most. In pursuit of delivering high returns to those at the top, corporations are driven to squeeze their workers and producers ever harder – and to avoid paying taxes which would benefit everyone, and the poorest people in particular.”

Neither the philanthropy of the super-rich nor socially directed corporate programmes have any real effect on combating this trend, in the same way that Zuckerberg’s handout of $3m will have a negligible effect on the San Francisco housing crisis. Instead, vast fortunes in the hands of the few, whether earned through inheritance, commerce or crime, continue to grow at the expense of the poor.

In the end, it is capitalism that is at the heart of philanthrocapitalism, and the corporation that is at the heart of corporate social responsibility, with even well-meaning endeavours serving to justify a system that is rigged in favour of the rich.

What is particular about this new approach is not that rich people are supporting charitable endeavours, but that it involves, as sociologist Linsey McGoey explains, “an openness that deliberately collapses the distinction between public and private interests, in order to justify increasingly concentrated levels of private gain”. 

In the CEO society, corporate logic such as this rules supreme, and ensures that any activities thought of as generous and socially responsible ultimately have a payoff in terms of self-interest. If there was ever a debate between the ethics of genuine hospitality, reciprocity and self-interest, it is not to be found here. It is in accordance with this CEO logic that the mechanisms for redressing the inequality created through wealth generation are placed in the hands of the wealthy, and in a way that ultimately benefits them. The worst excesses of neoliberal capitalism are morally justified by the actions of the very people who benefit from those excesses. Wealth redistribution is placed in the hands of the wealthy, and social responsibility in the hands of those who have exploited society for personal gain.

Meanwhile, inequality is growing, and both corporations and the wealthy find ways to avoid the taxes that the rest of us pay. In the name of generosity, we find a new form of corporate rule, refashioning another dimension of human endeavour in its own interests. Such is a society where CEOs are no longer content to do business; they must control public goods as well. In the end, while the Giving Pledge’s website may feature more and more smiling faces of smug-looking CEOs, the real story is of a world characterised by gross inequality that is getting worse year by year.