Quote of the Day: The main difference between non-profit and for-profit

The main difference between non-profit and for-profit is that non-profits are accountable to donors and for-profits are accountable to customers. This means that the non-profit sector is going to be more elitist and more less efficient than the for-profit sector. It does not mean, as so many people think, that the non-profit sector operates from better motives or provides more social benefit.

I am not saying that a non-profit sector is a bad thing. Just remember that it is inherently paternalistic, and that is problematic.

(italics original)

This is from economist, author and entrepreneur Arnold Kling at his blog.

Warren Buffett’s Declining Popularity; Fund Raising Charity Lunch Crashes by 71%

Perhaps, like me, many may have come to realize that a shift of investing paradigm from “value” to “rent seeking” cronyism requires little financial acumen. 

And a political route towards investing means partisanship that leads to polarization and ethical erosion. Thus Warren Buffet may have been losing lots of fans as measured by the latest charity fund raising lunch.

Writes the Zero Hedge (bold original)

Demand for Warren Buffett, the investor, peaked in 2012 when an anonymous donor bid $3,456,789 for the annual Glide Foundation's eBay lunch with the Octogenarian of Omaha. Demand for Warren Buffett, 82, the Obama tax and fairness advisor, however, is a mere fraction as the stunned Glide Foundation found out last night when the final bid for the "Power Lunch for 8 with Warren Buffett to Benefit GLIDE Foundation" auction closed at the lowest possible 6 digit increment, or an embarrassing $1,000,100. This was the lowest demand to have lunch with Buffett since 2007.This is a stunning result considering that with every passing year, for obvious reasons, the likelihood of many more such "power lunches" drops exponentially. We hope Buffett-demand is not a proxy leading indicator for the stock market or else a 71% plunge is coming.

Poetic justice?

Quote of the Day: Nobody is More Generous than the Miser

In this whole world, there is nobody more generous than the miser—the man who could deplete the world’s resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.

If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer—because you produced a dollar’s worth of goods and didn’t consume them.

Who exactly gets those goods? That depends on how you save. Put a dollar in the bank and you’ll bid down the interest rate by just enough so someone somewhere can afford an extra dollar’s worth of vacation or home improvement. Put a dollar in your mattress and (by effectively reducing the money supply) you’ll drive down prices by just enough so someone somewhere can have an extra dollar’s worth of coffee with his dinner. Scrooge, no doubt a canny investor, lent his money at interest. His less conventional namesake Scrooge McDuck filled a vault with dollar bills to roll around in. No matter. Ebenezer Scrooge lowered interest rates. Scrooge McDuck lowered prices. Each Scrooge enriched his neighbors as much as any Lord Mayor who invited the town in for a Christmas meal.

Saving is philanthropy, and—because this is both the Christmas season and the season of tax reform—it’s worth mentioning that the tax system should recognize as much. If there’s a tax deduction for charitable giving, there should be a tax deduction for saving. What you earn and don’t spend is your contribution to the world, and it’s equally a contribution whether you give it away or squirrel it away.

 This is from author and University of Rochester economics professor Steven Landsburg on the virtue of savings.

Quote of the Day: Big Government Destroys Systems of Interaction and Help

I want collective action that is voluntary not coerced. I want people to have the incentive to come together and help others. Government takes my money and gives it to other people. Sometimes it’s good people. But sometimes it’s not. So it doesn’t just replicate what I would have done already. It distorts it. But more importantly it discourages the deeply human ways we help one another as friends and family. I don’t want to romanticize private charity or the way families work. They’re both deeply flawed and imperfect. But big government destroys those systems of interaction and help. Big government makes it cheaper to be on our own. It makes it cheaper to avoid helping others because the government is doing it already.

This is from Professor Russ Roberts at the Café Hayek, discussing a comment  skeptical of the Road to Serfdom.

Quote of the Day: The False Doctrine of Altruism

Altruism is a code of ethics which hold the welfare of others as the standard of "good", and self-sacrifice as the only moral action. The unstated premise of the doctrine of altruism is that all relationships among men involve sacrifice. This leaves one with the false choice between maliciously exploiting the other person (forcing them to be sacrificed) or being "moral" and offering oneself up as the sacrificial victim.

This is from Jeff Landauer and Joseph Rowland at the ImportanceofPhilosophy.com

UK’s Government Discourages Charity

We are often told that the private sector is instinctively greedy, and thus requires intervention to spread ‘charity’ and ‘compassion’.

Well, in the UK, acts of private sector charity or philanthropy will be penalized.

From Wall Street Journal Wealth Blog,

The U.K.’s new budget has ignited all manner of class warfare. Retirees say it’s a gift to the rich at the expense of the poor. The wealthy say it’s another attack on success and job creators.

But one piece has gone largely unnoticed: the limit on philanthropic giving. The measure would cap the tax relief for wealthy givers at 25% of their annual income, or £50,000, whichever is higher. It takes effect next year.

It’s similar to the Obama proposal, which would limit charitable deductions for high earners to 28% for couples with incomes of $250,000 or more or individuals with income of $200,000. The White House says limiting itemized deductions would shrink the deficit by $584 billion over 10 years.

The U.K. expects its measure (along with caps on business deductions) to result in $490 million in saved revenue.

“Giving shouldn’t mean you pay no tax,” according to the U.K. Treasury.

Yet charities say the plan would put a chill on philanthropic giving just as the U.K. government is trying to create a new culture of giving.

The “new culture of giving” is that the government forcibly takes what you own (by taxation), which in turn discourages acts of private charity (both by administrative limits and again by taxation--what you opt to donate will be taken instead).

And as the norm, governments spend these confiscated resources charitably on their pet projects (to the benefit of cronies and or to vote rich welfare dependents or for photo Op sensational projects).

This is not really new. It has been the nature of governments to undertake lawful plunder of the resources of the citizenry when so deemed politically expedient.

As the great Frédéric Bastiat wrote in The Law published in 1850

When does plunder cease, then? When it becomes more burdensome and more dangerous than labor. It is very evident that the proper aim of law is to oppose the fatal tendency to plunder with the powerful obstacle of collective force; that all its measures should be in favor of property, and against plunder.

But the law is made, generally, by one man, or by one class of men. And as law cannot exist without the sanction and the support of a preponderant force, it must finally place this force in the hands of those who legislate.

This inevitable phenomenon, combined with the fatal tendency that, we have said, exists in the heart of man, explains the almost universal perversion of law. It is easy to conceive that, instead of being a check upon injustice, it becomes its most invincible instrument.

It is easy to conceive that, according to the power of the legislator, it destroys for its own profit, and in different degrees amongst the rest of the community, personal independence by slavery, liberty by oppression, and property by plunder.

It is in the nature of men to rise against the injustice of which they are the victims. When, therefore, plunder is organized by law, for the profit of those who perpetrate it, all the plundered classes tend, either by peaceful or revolutionary means, to enter in some way into the manufacturing of laws. These classes, according to the degree of enlightenment at which they have arrived, may propose to themselves two very different ends, when they thus attempt the attainment of their political rights; either they may wish to put an end to lawful plunder, or they may desire to take part in it.

By preventing the private sector from engaging in philanthropic activities and by coercively taking their resources by law, who’s greedy now?

The Honor of Japan's 'Lonely Deaths’

From BBC.co.uk (bold emphasis mine)

The discovery of three bodies that lay unnoticed for up to two months in an apartment in Japan has raised concern over so-called "lonely deaths".

The three people, believed to be from the same family, were discovered on Tuesday in Saitama, north of Tokyo.

Electricity and gas to the house had been cut off, there was no food in the house and just a few one-yen coins.

Despite being the world's third richest country, Japan has seen a number of similar cases in recent years.

Such deaths are referred to as "kodokushi" - lonely deaths.

The BBC's Roland Buerk, in Tokyo, said when the police broke into the apartment in Saitama, they found the three bodies extremely thin.

It is believed they were a couple in their sixties and their son in his thirties who died of starvation. The alarm had been raised by the building's management company.

The Asahi Shimbun newspaper said that the family had asked a neighbour for help, but had been refused and instead advised to contact the welfare authorities.

The family did not do so, a move some local media outlets have put down to feelings of shame.

Asahi Shimbun quoted lawyer Takehiro Yoshida as saying: "Some people have a resistance to going on welfare and are reluctant to consult with authorities. Others are isolated in their communities."

Our correspondent says the case has prompted soul-searching in one of the most affluent societies on earth about whether the needy are falling through gaps in the welfare system.

The left points to this as an example of the lack of compassion of the system, which they use as an excuse to advocate for bigger welfare states.

Yet it is not true that Japan lacks safety net, in reality, the number of people enrolled in Japan’s welfare system has reached nearly reached the record set during post World War II.

According to the Japan Times

There were 2.02 million people receiving welfare as of March, close to the record 2.04 million in the aftermath of World War II, while the number of households on welfare in March hit an all-time high of 1.46 million, the government said

The total number of people was almost equivalent to the record monthly average of about 2.04 million logged in fiscal 1952, the Health, Labor and Welfare Ministry said Tuesday.

Moreover, not only has the welfare state increased dependency of many Japanese, which reduces their productivity (as well as of the nation), another adverse consequence has been to diminish community values.

As the above report shows, calls for assistance by the affected to seemingly desensitized neighbors “had been refused and instead advised to contact the welfare authorities.”

Already burdened by heavy taxes paid to the government, neighbors must have probably thought that such responsibility should be the cargo of the welfare state, thus the reluctance to extend aid.

To quote Professor Shawn Ritenour in a Biography of Economist Wilhelm Röpke

Compulsory aid "paralyzes people's willingness to take care of their own needs" and its financial burden makes people depend more on the state and expect more from it. "To let someone else foot the bill" is the "very essence" of the welfare state; moreover, the people who pay are "forced to do so by order of the state"--the opposite of charity. "In spite of its alluring name, the welfare state stands or falls by compulsion. It is compulsion imposed upon us with the state's power to punish noncompliance. Once this is clear, it is equally clear that the welfare state is an evil the same as every restriction of freedom."

Hence, the politics of coercive welfare redistribution reduces the zeitgeist of voluntary charity.

Finally, the few Japanese who endured the 'lonely deaths', who by their “resistance to going on welfare and are reluctant to consult with authorities”, willingly refused to become a liability to taxpayers, or wards of the state, which they perhaps deemed as stigma. They must have died out of principle, and thus should be honored as true patriots.

The Essence of True Charity

The Wall Street Journal’s Wealth Report writes,

The 50 top philanthropists last year gave away a total of $10.4 billion – up by more than three-fold from 2010. The Chronicle of Philanthropy says that 29 people gave away more than $50 million each in 2011.

The strange thing is, you’ve probably never heard of most of them…

But what’s striking about the pantheon of top American givers is how little we know about any of them. They’re not in the news for buying giant homes, yachts or planes. They’re not funding Super-PACSs or spouting off about how they would run the country. And they don’t have reality shows.

The top rich givers are quiet, small-town patriarchs who made their riches in unglamorous industries like steel, natural gas and metal frames. They carry their wealth quietly and they honor the responsibilities that come with great wealth. They care about creating opportunities for others, not just for themselves.

My comment:

Real charity is about anonymity. So has it been written in the Bible (Matthews 6:2 New International Edition)

So when you give to the needy, do not announce it with trumpets, as the hypocrites do in the synagogues and on the streets, to be honored by men. I tell you the truth, they have received their reward in full.

And importantly, true charity emanates in the absence of coercion

As libertarian economist Floyd Arthur Harper wrote,

True economic charity has three characteristics:

1. Charity requires the transfer of ownership from one person to another of something having economic worth. The receiver must get a clear title to it, or it cannot be charity. The giver must have had clear title to it, or the giving is like a gift of stolen property — which is not an act of charity. Private ownership at both ends of the transfer, never public ownership, is therefore required.
2. The transfer must be voluntary with both parties. If forced upon the receiver against his will, it is not charity. If taken from the source against the prior owner's will, it is theft rather than an act of charity.
3. True charity requires anonymity. This is difficult to attain, to be sure. But if the conditions of the transfer result in a personal obligation in any form or degree, it is a grant of credit and not an act of charity. Devices other than anonymity usually fail to prevent the creation of a personal obligation.

May the tribe of genuine philanthropists increase!

Quote of the Day: Charitable Markets

But the truth is, Wal-Mart and its counterparts spread far more holiday-food cheer than do churches and public-service groups.

Scholars estimate that the presence of Wal-Mart in a community reduces food prices somewhere between 10% and 15%. That's equivalent to shoppers receiving an additional 5.2 to 7.8 weeks of "free" food shopping. That Wal-Mart's customer base is skewed toward lower-income shoppers reinforces the beneficent consequences of its price effect.

That’s from T. Norman Van Cott of Ball State University in a letter to the Editor at the Wall Street Journal (hat tip: Don Boudreaux)

Quote of the Day: Charity of the Markets

it is impossible to assess Mr. Jobs’s philanthropic legacy without discussing how Apple’s technology has changed the way nonprofits operate.

Devices like the iPhone and iPad have helped many organizations communicate more efficiently. They have allowed groups to improve the way they respond to disasters, communicate with supporters, and carry out their day-to-day work.

From Peter Panepento of the Philanthropy.com (hat tip Jeff Tucker).

Mr. Jobs’s philanthropic legacy can be seen from the largely 'unseen' factors, i.e. the consumer surpluses, wealth creation and in making people's lives significantly better.

Effective Disaster Recovery Programs are Based on Personal-Community Relationships

The success of disaster recovery programs has mostly been associated with personal relationships. (Sorry but it’s hardly about governments)

That’s the findings of NPR’s Shankar Vedantam. (hat tip: Prof Peter Boettke) [bold emphasis mine]

Aldrich's findings show that ambulances and firetrucks and government aid are not the principal ways most people survive during — and recover after — a disaster. His data suggest that while official help is useful — in clearing the water and getting the power back on in a place such as New Orleans after Katrina, for example — government interventions cannot bring neighborhoods back, and most emergency responders take far too long to get to the scene of a disaster to save many lives. Rather, it is the personal ties among members of a community that determine survival during a disaster, and recovery in its aftermath.

When Aldrich visited villages in India hit by the giant 2004 tsunami, he found that villagers who fared best after the disaster weren't those with the most money, or the most power. They were people who knew lots of other people — the most socially connected individuals. In other words, if you want to predict who will do well after a disaster, you look for faces that keep showing up at all the weddings and funerals.

Hayek’s local knowledge plays a key role. Again from the same NPR article (bold emphasis)

It's this passion for a local community and granular knowledge about who needs what that makes large-scale government interventions ineffective by comparison. It's even true when it comes to long-term recovery...

Governments and big nongovernmental organizations — which are keenly aware of the big picture — are often blind to neighborhood dynamics...

The problem isn't that experts are dumb. It's that communities are not the sum of their roads, schools and malls. They are the sum of their relationships.

Why does personal-community based relationship matter more than governments?

As I previously explained, (emphasis original)

Remember it is in the vested interest of the private sector to be charitable.

This is not only due to self esteem or social purposes but for sustaining the economic environment.

Think of it, if retail store ABC's customer base have been blighted by the recent mass flooding, where a massive dislocation- population loss through death or permanent relocation to other places- would translate to an economic loss for the store, then, it would be in the interest of owners of store ABC to "charitably" or voluntarily provide assistance of various kind to the neighborhood in order to prevent such dislocation from worsening, or as a consequence from indifference, risks economic losses.

Hence, such acts of charity is of mutual benefit.

Moreover, charity is the province of the marketplace. That's because markets produce and provides the goods and services required by society to operate on. Whereas government essentially don't produce goods or services but generates revenues by picking on somebody else's pocket.

With government, personal relationships are merely reduced to political interests.

With the marketplace, people see the benefit of social cooperation arising from social exchanges, which is fundamental to community building.

As the great Ludwig von Mises wrote, (bold emphasis added)

Within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of man's most delightful and most sublime experiences. They are the most precious adornment of life; they lift the animal species man to the heights of a really human existence. However, they are not, as some have asserted, the agents that have brought about social relationships. They are fruits of social cooperation, they thrive only within its frame; they did not precede the establishment of social relations and are not the seed from which they spring.

The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man's reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.

This is a truism which politicians and their media bootlickers always misrepresents.

Gawad Kalinga Antonio Meloto's Grandest Charitable Act

My salute to Antonio Meloto, founder of private charitable housing organization, the Gawad Kalinga, for declining the offer of President elect Noynoy Aquino to become the country's housing czar.

This from the Inquirer, (bold emphasis mine)

GAWAD KALINGA (GK) founder Antonio Meloto said the post of housing czar was offered to him by President-elect Benigno Aquino III but he turned it down.

In a media interview on the sidelines of the second Global Summit of the GK Community Development Foundation held here, Meloto said he discussed the offer with Aquino’s sisters, Ballsy Aquino-Cruz and Pinky Aquino-Abellada, recently.

At the end of the talks, Meloto said he refused the offer to join the Aquino Cabinet because he felt he would be more effective as a private citizen and philanthropist.

I can do more for my country by not being a Cabinet official,” said the 2006 Ramon Magsaysay awardee for community leadership.

Meloto was also the Inquirer’s Filipino of the Year in 2006.

My comment: Indeed, we share Mr. Meloto's view that his efforts will be more effective if he stays with the private sector.

That's because to quote Floyd Arthur "Baldy" Harper ``True charity must remain purely private rather than public and socialized. It must be voluntary. That is the nature of the greatest economic charity of all — savings invested in privately owned tools of production."

More from the Inquirer,

Meloto is the second RM awardee offered a post in the Aquino government. Former Naga City Mayor Jesse Robredo, the 2000 RM awardee for government service, was also offered the post of heading the Department of Interior and Local Government (DILG).

Meloto said he would rather focus on strengthening and promoting GK, which is expanding its projects to other Asian countries.

GK is a nonprofit organization that builds houses and develops livelihood programs for poor communities in the Philippines and other developing countries.

According to Meloto, developed countries like Singapore and Australia recognize GK not just as a charity organization but also as “a movement for nation-building.”

Schools and government agencies in these countries send students and representatives to the Philippines, through GK, to learn skills for community-building and conduct research studies.

Some companies send investment projects and financial assistance to the Philippines also via GK.

Meloto said foreign governments and organizations were willing to support GK because it is a private, nonprofit organization not connected to the government.

If he joined the Aquino government, Meloto said foreign governments might not trust GK anymore.

“They don’t trust politicians,” he said.

(bold emphasis mine)

My comment: Of course, in government all actions are political, so there will be emergent conflicts.

What is seen as charity is actually political redistribution of resources from coercion (taxation). People mostly see who is giving and what is being given, but they hardly see where and how these resources have been taken from.

As Ludwig von Mises once wrote, ``But the substitution of a legally enforceable claim to support or sustenance for charitable relief does not seem to agree with human nature as it is...The discretion of bureaucrats is substituted for the discretion of people whom an inner voice drives to acts of charity."

Therefore, his objection is not only valid it is realistic.

Likewise, he is living up to genuine charity work or social endeavour by avoiding potential conflict from political intervention.

I hope he doesn't change his mind.

It's a wonder, could Mr. Meloto be a libertarian?

Typhoon Onyok's Aftermath: Charity Is The Province of the Marketplace

This cordial comment from Dave Llorito of World Bank practically captures how the local community has responded to the recent calamity brought about by typhoon Ondoy,

``Despite the difficulties, the response to the crisis was immediate and heartwarming. Government, in particular the National Disaster Coordinating Council, immediately mobilized its rescue teams. Citizens’ groups, media organizations, civil society, universities, church organizations, and private business—organized through text messages and social media websites like Facebook and Twitter—responded by organizing their own volunteer teams to rescue trapped victims or bring food, water, clothes, medicine, and blankets. Help from the international community also poured in." (bold emphasis mine)

So have the entrepreneurs been "greedy" as earlier depicted by media and politicians? The answer is clearly no.

Remember it is in the vested interest of the private sector to be charitable.

This is not only due to self esteem or social purposes but for sustaining the economic environment.

Think of it, if retail store ABC's customer base have been blighted by the recent mass flooding, where a massive dislocation- population loss through death or permanent relocation to other places- would translate to an economic loss for the store, then, it would be in the interest of owners of store ABC to "charitably" or voluntarily provide assistance of various kind to the neighborhood in order to prevent such dislocation from worsening, or as a consequence from indifference, risks economic losses.

Hence, such acts of charity is of mutual benefit.

Moreover, charity is the province of the marketplace. That's because markets produce and provides the goods and services required by society to operate on. Whereas government essentially don't produce goods or services but generates revenues by picking on somebody else's pocket.

As Murray Rothbard wrote, ``it is hardly “charity” to take wealth by force and hand it over to someone else. Indeed, this is the direct opposite of charity, which can only be an unbought, voluntary act of grace."

Hence acts of government to redistribute reflects on politics and not of charity.

Despite Lesser Wealth, Philanthropic Activities Grows

In an environment where the world's richest have become materially less richer...

This from the Economist, ``THE wealth of the world’s richest people fell by almost a fifth last year to $33 trillion, according to the World Wealth Report from Merrill Lynch and Capgemini. A rich person is defined as having at least $1m of assets besides his main home, its contents and collectable items. The number of rich people shrank by 15% to 8.6m, or 0.1% of the world's population. Their wealth declined by more than 20% in North America, Europe and Asia, but by a bit less in Africa and the Middle East. Latin America’s rich were the least affected: they lost 6% of their wealth, and the number there fell by less than 1%. In North America, which had a large proportion of people just above the $1m threshold, the ranks slimmed by 19%." (emphasis added

Growth in philanthropic activities remain less affected...

According to the Economist, ``THE global recession has failed to dampen philanthropic spirit, with many rich people increasing their charitable giving, according to a new report from Barclays Wealth. Among the 500 British and American individuals with at least $1m of investable assets, only education was considered a more important expense than charitable commitments. Some 28% of Americans say they are giving less money compared with 18 months ago, though 26% are giving more. A similar pattern is seen among those givers from both countries who inherited their fortune. But entrepreneurs are more likely to give their cash away—31% say they have increased their giving and only 17% have reduced it."

The spirit of charity doesn't vanish along with the crisis. On this account, it even increases them.