Philanthropy Over Policy Equals Plutocracy

LarryChecco_Photo_LargeGuest commentary by Larry Checco

Philanthropy verses policy. What’s at stake? In the United States of America, perhaps our entire democratic process.

At a recent Brookings Institution event that focused on income inequality, John Prideaux, Washington correspondent for The Economist, was asked what a “good unequal society” would look like.

Prideaux replied that “a lot of the things we think are public goods would be provided for privately…in a sort of philanthropic way.” He added that this would entail a revival “of the 18th century idea of the obligation of those at the top of the income spectrum towards those at the bottom. (my emphasis)”

Prideaux gave an off-handed example of how the Gates Foundation perhaps — his fingers crossed — could provide better “welfare” to the people than “any government bureaucracy.”

Fast forward to a recent op ed piece in The Washington Post, written by a husband and wife team of obvious affluence, influence, and good will.

John and Carol Saeman, both devout Catholics, give generously of their time and treasure to the charitable works of their church (John is president of an investment and management company), as well as to other more laic (nonclerical, lay) organizations, including those run by people such as the billionaire Koch Brothers.

“Helping the poor…requires a fundamental change in how our society—and government—understands and seeks to address poverty,” they say in their op ed piece. “For us, promoting limited government alongside the Kochs” is in keeping with “Pope Francis’ call to love and serve the poor.”

The Koch organization that the Saeman’s ardently support is called Freedom Partners, a nonprofit organization composed of around 200 members, each paying a minimum US$100,000 in annual dues.

In 2012, Freedom Partners raised $256 million, making grants worth a total of $236 million to conservative organizations prior to the midterm elections, including Tea Party groups and organizations opposed to The Affordable Care Act. Your average middle class guy is probably not a member.

Regardless of the politics they embrace, wittingly or unwittingly, both Prideaux and the Saeman’s put forth the perfect scenario for a plutocracy—namely a society where wealthy people like the Koch brothers, the Gateses and others should determine and finance the common good verses employing the democratic process of the people.

In short, they are advocating philanthropy over policy, which leads us down a very slippery slope, folks.

When government works, policy reflects the will of We, the People. We elect political leaders whose job it is to pass laws and appropriate funds that promote the common good. If we don’t like the laws they pass or the funds they appropriate we have the opportunity, privilege and right to vote them out.

When it comes to philanthropy, as someone who has worked in the nonprofit sector for the better part of four decades, I can say with great confidence we run the real and great risk of relying on the kindness—and whimsy—of strangers.

If a huge philanthropic organization like the Gates Foundation decides to change course, what recourse do we, the people, have? Nada.

As imperfect and dysfunctional as our government is, I’m not willing to hand it over to the rich, regardless of their noble and good intentions—especially when it comes to defining the common good. Over the past 30 years or so, we’ve witnessed how that good has often translated into less taxes for them and less good for the rest of us.

One last point.

In their op ed piece, the Saeman’s make the argument that our welfare system encourages dependency and denies dignity to the poor. They leave out the fact that many people who work 40 hours a week at minimum wage for major corporations like Wal-Mart, McDonalds and many other large, well-heeled corporations lose dignity by having to rely on government programs to make ends meet, including food stamps.

BTW– in 2012, Forbes reported that just six Walmart heirs have as much wealth as 42 percent of all Americans. Say what!

Want to give people dignity? Rather than philanthropy, let’s pay hardworking folks a wage they can live and raise a family on. I guarantee you that people like the Waltons, Kochs and others in their economic stratosphere won’t miss a meal by doing so—and we won’t have to rely as much on their philanthropy.

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Larry Checco is principal of Checco Communications, a consulting firm that helps organizations define who they are, what they do, how they do it–and why anyone should care. Contact:  www.checcocomm.net

Contents © 2014 by Larry Checco – All Rights Reserved

Welcome, Janet Yellen to the Fed Chair – We Have Questions

Questions for Chairs Greenspan, Bernanke, Yellen:
–What has the Federal Reserve Learned?

by Larry Checco – Principal, Checco Communications

At his last public appearance before leaving office, Federal Reserve Chairman Ben Bernanke said: “We hope that as the economy improves, and as we tell our story…people will appreciate and understand what we did was necessary and in the interest of the broader public.”

Given that Wall Street is once again back on its feet and enormously profitable while millions of Americans remain unemployed, many having experienced near or total financial ruin from which they may never recover, Chairman Bernanke’s statement is arguable, at best.

Chairman Bernanke made his remarks as the keynote speaker, along with a bevy of high-ranking Federal Reservists and Fed watchers, all of whom were on hand to help launch the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy.

The event covered in highbrow fashion the yins and yangs of Chairman Bernanke’s unprecedented monetary daring-dos, including overseeing the big bank bailouts, taking short-term interest rates down to zero, purchasing more than a trillion dollars worth of government bonds and mortgage-backed securities, lending money to foreign central banks, and more.

Some speakers even looked to the future and brushed on the options that the Fed has for tapering, or reducing quantitative easing.

The one topic, however, that was not broached….

What could the Fed have done to prevent the Great Recession in the first place, and has it learned any lessons?

Prior to the collapse of the housing bubble, home prices in some regions were rising 10, 15, 20 percent and more annually. This, at a time when average annual wages had remained flat for a decade — or more.

People—both the greedy and unsuspecting—were encouraged to buy homes, or use the equity in their current homes as ATM machines, through usually-deceptive subprime mortgage products. Many of these loans required little or no money down — nor the need for borrowers to disclose their incomes or other information that would fall under the rubric of responsible underwriting practices.

Then there was the incidental detail that most of these loans would reset to rates many borrowers could not afford, resulting in millions of home foreclosures.

Red flags abounded.

Yet the Fed, with its hundreds of highly-educated economists, many with Ph.D.s after their names, and under the direction of former Fed Chairman Alan Greenspan, a true believer in minimal regulation and the invisible hand of the marketplace, did not, evidently could not or would not see this train wreck coming.

Instead, at a Congressional hearing in October 2008, Chairman Greenspan explained that the Federal Reserve was “…as good an economic organization as exists. If all those extraordinarily capable people were unable to foresee the development of this critical problem…we have to ask ourselves: Why is that?”

Chairman Greenspan answered his own question by saying “…that we’re not smart enough as people. We just can’t see events that far in advance.”

Pah-leese!

A more plausible response would have been the Fed had abandoned all common sense for the ideological position that free markets take care of themselves, or as Chairman Greenspan inimitably stated before Congress “…that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in their firms.”

Well, we all know now how that presumption ended! For most of us.

But perhaps the most logical explanation is that way too many people were making way too much money that was sloshing around —fees and bonuses for home appraisers, mortgage brokers, bundlers of collateralized mortgage obligations (CMOs) right on up to Wall Street investors who couldn’t get enough of what turned out to be terribly flawed investment vehicles.

And no one, including Chairman Greenspan or anyone else in the Federal Reserve system, had the cajones to break the expanding chain of greed.

During his tenure, Chairman Bernanke performed a yeoman’s task in keeping us from an economic depression. But now his time is over.

It’s encouraging that the newly-installed Fed Chairwoman Janet Yellen turns out to have been an early critic of what was then — in the early 2000s — a fledgling bubble in subprime lending. Unfortunately, few paid heed. We can’t afford to let that happen again.

If there is one common sense lesson many of us hope the Federal Reserve has learned from this latest economic fiasco is that when billions of dollars in potential profits are cast upon the financial waters our better angels do not descend from on high to help divvy it up. Rather, the sharks do ascend from the shadowy depths to engage in a feeding frenzy, oblivious to how many smaller, innocent fish are devoured in the process.

In short, should you read this commentary, Ms. Yellen, I hope you will agree that greed is NOT good, and common sense trumps whatever ideologies or economic models the Federal Reserve System may harbor.

BTW, a bit more regulation and oversight over the sharks wouldn’t hurt. They have proven time and again that they cannot control their bloodlust instincts.

 

Guest commentary by Larry Checco / Checco Communications

Larry Checco
Content © 2014 – All Rights Reserved