Because I am recommending this book (see Reading List), I am compelled to briefly counter some of the conclusions drawn by the author, Melissa Fay Greene. Please take this for what it is– my personal analysis of the underlying facts– and do not let my conclusions or Greene’s conclusions deter you from experiencing the heart of this story. In the end, you may not agree with me, but at least you’ll know where I stand!
1. Greene concludes that Americans are (a) stingy (b) with Africa. In the Q&A epilogue, Greene reiterates a theme throughout her book: “We think we are big givers, we Americans, but, proportionately, our nation is at the very bottom, the very stingiest of the Western democracies sharing their wealth with Africa.” Both parts of this statement are incorrect.
(a) Americans are stingy. On the contrary, Americans are empirically among the most charitable in the world. Three out of four U.S. families donate money to charity at an average rate of 3.5 % of pre-tax household income, or 2% of U.S. GDP. 50% of Americans also volunteer their time. To head off an obvious objection, note that most of Americans’ charitable giving – about two thirds – and a majority of their volunteer time does not go to “religious” activities. Arthur C . Brooks, Who Really Cares, Basic Books, 2006, citing various sources.
Greene correctly states that the U.S. government gives less foreign aid as a percentage of GDP (less than .02%) than some other countries, but this number ignores the total giving by Americans. Americans, unlike many in the rest of the world, generally value private charity above public funding, so it is no surprise that individual giving far outpaces government aid by any measure.
“[G]iving at the private level is a foreign concept to [Europeans].” Studies ten years ago found that Americans overall give 3.5 times more than the French, 7 times more than Germans, and 14 times more than Italians. Adjusting for variables like average income and tax burden, the results barely change. Charitable giving in recent years has become so irrelevant in Europe that it is no longer evaluated. Who Really Cares, citing John Hopkins Comparative Nonprofit Sector Project.
Private Charity vs. Public Aid. Like many people, Greene seems to confuse charity (which is, by definition, voluntary) with tax-based (compelled) public aid. One is not generous because one supports tax-funded programs: giving away other people’s money is easy. There may be legitimate reasons for government social programs and foreign aid– that is a discussion for another day– but personal generosity is not one of them. Yet, “[f]or many people, the desire to donate other people’s money displaces the act of giving one’s own.” Studies show that people who believe that the government is responsible for increasing income equality are substantially less likely to volunteer their time or donate their money than people who do not believe this. Who Really Cares, citing various sources.
I prefer private (voluntary) charity to public (compelled) aid for a number of reasons. First, charity is Biblical: “And now abideth faith, hope, charity, these three; but the greatest of these is charity. 1 Cor. 13:13. In addition to or as a subset of charity, tithing is called for broadly, including a 10% “social” tithe (Lev.27:30-33, Num. 18:20-26) and an additional 3% “poor” tithe (Deut. 14:28-29). The “social” tithe funds health, education, and welfare ministries, worship, missions, and administration of justice, while the “poor” tithe is earmarked solely for the needy.
Second, charitable organizations are more efficient, effective, and responsive than government agencies. Charitable donations experience less reduction by bureaucratic overhead and “middlemen,” including corrupt foreign officials who divert aid for their own purposes. If a charity squanders money, donors shift their support to more responsible organizations. If a government agency squanders money, tax-payers are asked to pay more to fix the problem. The effectiveness and responsiveness of non-governmental entities is even evident in anecdotal accounts throughout Greene’s book.
(b) Americans are not sharing enough with Africa. Some would say more generally that Americans are not sharing enough with the world. After all, only about 2% of U.S. charitable giving is “international,” with 98% remaining in the U.S. In fact, American charity internationally is competitive, when both foreign aid (.01 - .02% of GDP) and foreign charity (.04% of GDP) are factored together.
Indonesia 2004. Consider foreign aid to Indonesia following the 2004 tsunami disaster. Germany gave $674 million, Japan $500 million, Australia $380 million, and the U.S. $350 million. Comparing government aid alone would lead one to conclude that the U.S. did not do its part, and some publicly berated President Bush himself as being personally uncaring because of the lack of U.S. government aid. (Whether he personally donated his own money was irrelevant: he did not give away enough of his constituents' money.) Ultimately, however, Americans donated $1.5 billion, outpacing nearly every other country by any measurement, with individual, private donations outpacing government aid three-to-one, a phenomenon largely confined to the U.S. Who Really Cares, citing “Helping the Survivors,” Economist, January 8, 2005. Nevertheless, the focus remained on the amount the government pledged, and Americans as a whole were harshly criticized.
Foreign Aid Budget Presents Incomplete Picture. Focusing on the U.S. foreign aid budget in a vacuum erroneously ignores the disproportionately high level of private charity in the U.S. In addition, the U.S. foreign aid budget taken on its own may be misleading because it does not reflect significant indirect aid, nor does it account for the variety of types of aid or the wide range of motives and results.
[Foreign] aid is seldom given from motives of pure altruism, for instance it is often given as a means of supporting an ally in international politics; it may also be given with the intention of influencing the political process in the receiving nation. . . . Besides criticism of motive, aid may be criticized simply on the grounds that it is not effective: i.e., it did not do what it was intended to do or help people it was intended to help. Excerpt from Wikipedia.com, Aid, 2009.
U.N World Food Programme. To examine one specific type of aid may be anecdotally helpful. The world’s largest humanitarian agency, the U.N. World Food Programme, receives approximately 40% of its funding from the U.S. government. Of the 87 donor countries contributing $2.7 billion in 2007, the U.S. was the #1 donor, contributing $1.2 billion, or .01% of its GDP. In contrast, France, a vocal critic of U.S. aid, contributed only $32 million, or .001% of its GDP. Contributions to WFP 2007 report at wfp.org.
Value Judgments. Are some charitable purposes more important – more valuable – than others? To someone who values art and education, donating time and money to public broadcasting may be more “right” than donating to a children’s hospital. To some, relief efforts in Africa may be “better” than relief efforts in Indonesia, and Ethiopian orphans may be more “deserving” than Costa Rican orphans. (An increasing number of people seem to oppose foreign humanitarian aid altogether, instead arguing that those dollars should be allocated to domestic needs, as cuts are made across the board.) Many people criticize how U.S. foreign aid is allocated, and no two people can agree on how best to spend those dollars. That is the beauty of charity: if each person voluntarily and generously gives his time and money to the charitable purpose close to his heart, whether domestically or internationally, religious or secular, the world as a whole will be a better place. Rather than asking “what can the government do to help” and then searching the tax rolls to find “better” ways to spend other people’s money (which is neither generous nor charitable), we should ask “what can I do to help” and then search our own hearts to find “better” ways to allocate our own resources.
2. Greene blames pharmaceutical companies and U.S. patent policies. There may have been specific wrongs committed by drug companies in connection with AIDS medications in Africa; I have not researched Greene’s particular allegations in any depth. I can say with certainty, however, that some of the criticisms of the pharmaceutical industry by Greene are gravely misplaced. I start with the premise that AIDS medications are no more valuable than other life-saving and life-changing medications. Of the record number of drugs now in development in the U.S., 750 are cancer-related, over 300 are heart disease/stroke-related, nearly 100 are for Alzheimer’s/dementia, the list goes on. Accordingly, whatever justification one finds for regulating the pharmaceutical industry’s policies on AIDS medications must apply equally to all medications and across all borders. Equally tragic are the experiences of an individual dying of cancer and an individual dying of AIDS, an individual in Ethiopia who cannot afford a life-saving drug and an individual in the U.S. who cannot afford a life-saving drug.
Price-gouging or cost-averaging? For every “hit” drug that is developed, years of research and development and millions of dollars are invested in drugs that never make it to market, or make it to market and are later pulled in the face of lawsuits regarding unforeseen side effects. According to Pharmaceutical Research and Manufacturers of America, U.S. pharmaceutical companies invested $65 billion in R&D in 2008, or 8 times the level of R&D investment per employee of all other manufacturing industries, according to a study by The Wharton School. The cost of a “hit” drug must, inherently, absorb the staggering costs of the “miss” drugs as well as generate profits averaged over all the “hits” and “misses.” What looks like price-gouging to one examining the cost of a single drug in a vacuum may look like legitimate pricing to another examining the overall cost of the industry.
A Recurring Theme: Value Judgments. To a person who is starving, the wheat farmer may be acting unconscionably by charging $5 a bushel. To a person who is freezing, the hotelier with empty rooms charging $200/night may be price-gouging. At the end of the day, free market capitalism remains the most efficient economic model resulting in the most productivity, and private charity remains the most efficient social aid model resulting in the most benefit. These two models, grounded in Biblical principles, have historically set the U.S. apart from the rest of the world, and practiced in conjunction with one another make the world a better place.
Patent protection. Drug companies rely on patents to protect their property. Intellectual property may be more costly than real property, and generally receives less protection. A farmer may spend $2 million to purchase a wheat farm. That farmer will own that wheat farm – generating life-sustaining food – indefinitely. His ownership does not expire in 10 or 20 years. In contrast, drug companies spend an average of $800 million to bring one new drug to market. Without worldwide patent protection giving the pharmaceutical company the time – and the right – to recoup its investment and make a profit, investment in R&D will decline and fewer new, life-saving drugs will be available to anyone.
Public research, private profits. Greene criticizes the U.S. policy that permits government-funded research to be given to for-profit drug companies, with profits shared 50/50. Overall, this is in practice a good policy. After a new drug is initially identified, it still takes many years and tens of millions of dollars to develop the drug and bring it to market. Greene herself acknowledges that the rights to the “interesting molecule” that became the anti-AIDS/HIV drug AZT were purchased by Burroughs Welcome before its impact on HIV was confirmed. How many other “interesting molecules” are purchased and amount to naught? (Other claims to AZT and challenges to the patent were resolved in favor of Burroughs Welcome by neutral judges.)
Because the U.S. government is not, and should not, be in the pharmaceutical business, 50% profit sharing for little more than an idea, with no ongoing R&D to market hard dollar investment, is appropriate. How much longer would it have taken, and how many more people would have suffered in the interim, if the government had been relied upon to bring AIDS medication to market. If drug companies then “price gouge” the new medicine, the U.S. government may earmark its 50% share of those profits to subsidize the purchase of the drugs. Better yet, private charity may be used to subsidize life-saving and life-changing medicines.
Regulation has a steep cost. We should avoid “throwing the baby out with the bathwater” or, more accurately, “splitting the baby” by adopting policies that effectively guarantee that until everyone will have the drugs, no one will have them. Put more eloquently by Dr. Elizabeth M. Whelan, president of the American Council on Science and Health: “Any government form of price control on pharmaceuticals represents a case of killing the goose who laid the golden egg. . . . It is crystal clear that countries with price controls do not have companies that produce new, innovative drugs. The United States stands alone now as the leader in new drug production – accounting for approximately 90 percent of new medicines.”
Work to get your piece of the pie, share it, and change the world. Glaxo Welcome f/k/a/ Burroughs Welcome, the owner of the AZT patent that expired in 2005 that is harshly criticized by Greene, is part of GlaxoSmithKline, a publicly traded company. If you believe that GlaxoSmithKline or any other company is “wrongly” profitable, or if you just want to influence their practices, invest your hard-earned dollars in the company and use your investment earnings– a direct reflection of the company’s profits –and shareholder vote to “do good,” however you may define that.
*Note: GlaxoSmithKline’s stock price, reflecting their actual and expected earnings, has declined 40% over the past year. Despite the former “extravagant price tag” on AZT cited by Greene, in 2004, the year before its AZT patent expired, the value of GSK stock traded on the New York Stock Exchange increased 17%, not a particularly outrageous increase relative to other non-pharmaceutical companies, despite alleged price gouging.
Whether my paycheck or dividend check says “ACME DRUG CO.” or “ACME SCHOOL DISTRICT,” I have a personal choice to make with respect to what I do with the resources I have. I can buy AZT for one suffering person. I can love one hurting child. I can do my part to change the world.
*Note: Because my net worth is over $100,000, I am one of the wealthiest people in the world. If my net worth were over $500,000, I would be in the top 1% (I’ll be there in my lifetime, God-willing). The typical (median) person worldwide has a net worth of only $2,200. Eduardo Porter, Study Finds Wealth Inequality is Widening Worldwide, The New York Times, December 6, 2006. The average worldwide income is around $7,000/year, with the world median income at only $1,700/year. Average Income Worldwide, The Boston Globe, October 7, 2007. Because my income is over $1,700/year and my net worth is over $2,200, I may not point my finger at the “wealthy” other person (or company, or government) and cry “do more,” for he is me.
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Who Really Cares. America’s Charity Divide: Who Gives, Who Doesn’t, and Why It Matters. We all know we should give to charity, but who really does? In this provocative and controversial study of America’s giving habits, Arthur C. Brooks, a Louis A Bantle Professor of Business and Government Policy at Syracuse University’s Maxwell School of Citizenship and Public Affairs, shatters stereotypes about charity in America – most notably, the myth that the political Left is more compassionate than the Right. Brooks, a preeminent public policy expert, spent years researching giving trends in American, and even he was surprised by what he found. In Who Really Cares, he identifies the forces behind American charity: strong families, church attendance, earning one’s own income (as opposed to receiving welfare), and the belief that individuals – not government – offer the best solution to social problems. Beyond just showing us who the givers and non-givers in America really are today, Brooks shows why charity matters – not just to givers and to recipients but to the nation as a whole. He demonstrates conclusively that giving is crucial to our economic prosperity, as well as to our happiness, health, and our ability to govern ourselves as a free people. Back Cover, Who Really Cares, Arthur C. Brooks, Basic Books, 2006.
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