Philanthropy

When a wealthly industrialist starts dispensing medicine for what ails us, it's worth noting. Richard Pratt (25/1) suggests redirecting 1% of corporate profits to community groups, effectively bypassing the taxation and representation functions of governments. While corporate philanthropy should be applauded, Pratt's Compact warrants closer scrutiny as it is displacing the role of governments. In terms of fairness and efficiency, how well do these schemes perform?

Firstly, under the present arrangements we contribute taxes into a pool and then collectively decide on policies and priorities through Parliament. One adult, one vote. But under Pratt's Compact, the more shares you own, the more of a say you have about funding projects. Over time, we can expect the priorities of the shareholding minority to take a front seat. My prediction is for lost dogs homes and grafitti to do well at the expense of rural poverty and the elderly.

Secondly, it's not clear that direct corporate funding of community projects is more efficient than taxation. There is a lot to be said for the "economies of scale" and integration of projects that governments can achieve. Canadian author John Ralston Saul examined this issue in the US and concluded it can cost up to six times more to raise funds this way than through taxation, while the taxpayers still contribute around eighty percent of the money. This makes sense as those society balls, naming ceremonies, celebrity engagements and other costs of wooing sponsors really add up. As Saul noted, the "reversion to charity has brought with it, to a degree not seen even during the Renaissance, an indulgence of the ego of donors".

Before we are urged to go yet again down the American path, we need to hear more discussion about how corporate philanthropy out-performs the existing funding allocation system.