(Interviewed by Louis James, Editor,
International Speculator)
L:
Doug, our readers are hoping to live well for the rest of their lives.
That’s what
The Casey Report and all our other publications are about, really.
If they are successful, they’ll have some money left over at the end.
Some have wondered, given your low opinion of trying to use the state
to improve the human condition, if there’s a private charity you think
might be a good place to direct funds they no longer need.
Doug:
No.
L:
That’s it? No?
Doug:
Most charities aren’t worth the cost of the gunpowder it would take to
blow them to hell.
L:
And the permitting for the demolition – fuhgeddaboudit. But can you
explain why?
Doug:
Sure. Charities are largely counterproductive. Their main
beneficiaries are not the intended recipients, but the givers. They
get some tax benefits, but mainly they get the holy high of do-goodism.
Frankly, the idea of charity itself is corrupting to both parties in
the transaction.
For instance, take Bill Gates and Warren
Buffett. Both are geniuses at their businesses. But they’re the type
of geniuses I consider to be idiot savants. If they really wanted to
improve the state of the world, they should continue doing what they
do best, which is accumulating wealth. Or, actually, creating it – as
opposed to dissipating it by giving it away. Giving money away breaks
up a capital pool that could have been used productively by those who
build it for making new wealth (which increases the amount of wealth
that exists in the world).
Worse, giving money away usually delivers it
into the hands of people who don’t deserve it. That sends the wrong
moral message. People should have, or get, things because they deserve
them. And you deserve things because you earn them. In other words,
wealth should be a consequence of doing things that improve the state
of the world. Endowing groups, or individuals, because they happen to
have had some bad luck, or are perpetual losers, is actually immoral.
When money is given away, it’s almost as bad
as government welfare. It makes it unnecessary for the recipient to
produce, and that tends to cement him to his current station in life.
The very act of making an urgent situation non-urgent takes away the
incentive, the urgency, to improve.
Morally speaking, charity is not a virtue,
it’s a vice.
L:
The giver gets to feel good at the expense of the people whose
independent drive they undermine. But what about the programs that are
specifically designed to teach an individual to fish, rather than to
just hand out fish – those that teach job skills, for example – do you
see them the same way?
Doug:
I’m not saying that programs like that can have no positive effect.
There are people who genuinely want to improve themselves, but, for
whatever reason, just can’t manage it on their own. But charity is not
the best way to approach the issue.
Look, the basic point I’m making is that the
best way to reduce the amount of poverty in the world is to create
more wealth – as much as possible, as quickly as possible.
The essence of a charity transaction is to
transfer wealth from those who have shown they can create it to those
who have not shown they can. I mean, if a man doesn’t know how to
“fish,” which isn’t exactly rocket science, after all, you have to
wonder why – something we discussed in our
chat about education. Money is best left in the hands of the most
competent and productive people, and the best way to tell who’s the
most competent and productive is generally to look at who’s created
the most wealth.
L:
And the more wealth there is in the world, the better off everyone is
– even those who end up working for the creators.
Doug:
Right. And those employees are creating and earning on their own
wealth as well. It sure has a lot more dignity than being a welfare
bum. Besides, if they are competent and creative, there’s no reason
for them not to rise to the top.
L:
And as we discussed
last week, you need large pools of capital to develop new
technologies, and new technologies tend, on average, to improve the
lot of the little guy proportionally more than the guy at the top of
the social pyramid.
Doug:
Yes. Charity exists, mostly, to make the donor feel good. It assuages
guilt people accrue over a lifetime, for real or imaginary reasons.
L:
I remember that interview John Stossel did with Donald Trump, in which
he asked him to explain why he gave a billion dollars to the UN. Trump
looked poleaxed for a minute, then got up and walked out of the
interview.
Doug:
[Laughs] That’s a polar extreme opposite to charity. That was giving
money to an organization that is itself destructive. Counterproductive
in the extreme. The UN, which is just a corrupt club for governments,
should be abolished, not subsidized. And here’s this fool actually
feeding the beast.
It’s a perfect example of what most
so-called charitable giving is about. It’s an excuse for people to
display their fine philanthropist plumage. It’s a never-ending contest
of one-upmanship, to see who can be the king of the hill of fools for
a day, by giving the most. In most cases, it’s not about what the
money is going to, it’s about being a big shot among peers and getting
invited to all the most fashionable parties. They get to socialize
with celebrities and others who, in our corrupt society, buy fame by
giving away money – which in many cases was either easily earned or
unearned.
In most cases, philanthropy doesn’t arise
from a love for one’s fellow man, but from a need to assuage guilt, a
need to show off, and a lack of imagination.
L:
So, your basic argument is like the old saying about it being common
sense that it’s better (and cheaper) to put a fence at the top of a
cliff, rather than to put an ambulance at the bottom of the cliff.
That is, rather than putting band-aids on the poverty-stricken, it’s
better not to have any poverty-stricken. Therefore, it’s
better to allow wealth to continue accumulating and creating more
wealth. And that means that any effort to take wealth away from the
wealthy – the productive – and give it to the non-productive, is…
counterproductive.
Doug:
That’s basically the argument. Yes. And it’s true for both practical
and ethical reasons.
L:
Okay. So, what happens when you run into literally starving orphan
babies in Haiti, the way you did? Even if you allow wealth to
accumulate, and society becomes 50 or 100 times wealthier, and that
decreases poverty by 50 or 100 times – or maybe 1,000 times. There
will still be some cases of people who, through genuinely no fault of
their own, truly need a helping hand – and the consequences would be
dire if they don’t get it. What would you advocate in those
situations?
Doug:
Well, in the first place, though I’m not a Christian, let me quote
Jesus of Nazareth. He said, “The poor, you will always have with you.”
He had a different context in mind, but he was quite correct. That’s
because in most cases, poverty is not a function of bad luck.
It can be, sometimes, of course. Perhaps if
you’re born in a country with a brutal and repressive regime, or if
you’re born with mental handicaps – there are all kinds of things that
can happen. But generally, with a few such exceptions, poverty is
simply a sign of bad habits. In a relatively free country, it’s a sign
of an inability or unwillingness to save, which is to say, to produce
more than you consume. It’s a sign of a lack of self-discipline. Sloth
that afflicts those not willing to learn skills they can sell to other
people. It can be a sign of having no self-respect, as among those who
spend all their money on drugs and alcohol, which are debilitating,
rather than strengthening.
In the vast majority of cases, those who
suffer from poverty are not victims of anything other than their own
bad habits.
L:
Wow. Tough words.
Doug:
It’s even worse than that. Think about it. Let’s say we’re looking at
some place where there’s been a drought, or some other serious natural
disaster, and then organizations like the UN ship in thousands of tons
of food. What happens when that food hits the local market?
L:
Does it even get there? Doesn’t the local dictator usually take it and
sell it in some other country where people can pay for it, and then
stash the cash in a Swiss bank account?
Doug:
Well, that’s the first thing that happens, of course. But even when it
gets through to them, such aid rarely helps the people it’s supposed
to help. In fact, it usually hurts them, because, as I was saying,
when all that free food hits the local market, it drives the price of
food down so low, the local farmers can’t produce profitably.
What happens when you drive the local
farmers out of business? They stop planting, there’s no crop the next
year, and the shortage of food becomes even worse. The very acts of
these charities trying to help people in famine-stricken areas prolong
the famines.
Now, I’m not saying that if you know someone
who needs a helping hand, and you feel good about helping – which is
different from feeling guilty about not helping – that you shouldn’t
do it. It can be a good-karma thing to do – and I do believe in karma,
incidentally.
But when these things are institutionalized,
they create distortions in the marketplace.
L:
People may think it strange to hear you talking about markets in
famine-stricken places or regions devastated by earthquakes, etc. But
markets are everywhere. They are not physical places in New York and
London, but are aspects of human psychology. They are patterns of
human behavior created by people when they enter into voluntary
transactions – as distinct from government action, which is always
based on coercion. In today’s world, famine can still be caused by
storms, drought, and other natural events. But it’s more often caused,
and always aggravated, by distortions in the market: taxes, wars,
idiotic regulation, runaway inflation, and the like.
Doug:
And when a big charity intrudes on one of these weakened, distorted
markets, it usually adds even more distortions, prolonging the
problem.
Consider these charitable organizations
going around the world treating diseases. The reason these countries
have these terrible diseases that kill so many people is because they
are economically undeveloped. Keeping people alive via extraordinary
measures in such a place only results in more people competing for the
same scarce resources. The answer to the problem is not to send in
teams of doctors, so that you’ll have even more destitute people
producing no wealth, but to free the local market so the people can
become wealthy. The disease will go away as a consequence – this is
the only permanent cure. What they are doing is the exact opposite of
what they should be doing; they are making things worse.
L:
Sounds pretty cold, Doug, to say, “Don’t send doctors—”
Doug:
Well, don’t forget that a lot of people have supported the likes of
Mugabe and deserve the economic ruin they are getting – and the
diseases that are going to follow. Send doctors in if it makes you
feel good, but it’s putting band-aids on smallpox. Don’t imagine that
you’re actually helping solve the problem. People who do this kind of
thing, I believe, do it because of feelings of guilt and shame they
carry around inside. I understand them, but I don’t agree with them.
It does sound cold-blooded, and I’m sorry. I
like kids and dogs and the same things most people like. But I’m not
talking about whatever I or others might imagine is nice. I’m talking
about the only real way to solve such a problem.
It’s disgusting to see the hot-shot yuppies
self-righteously driving around the African bush in their new Land
Rovers, pretending they’re eliminating poverty. That’s where most of
the money goes, in fact. High living and “administration.”
L:
You didn’t let me finish. I was saying that it sounds cold-blooded,
but who’s really more cold-blooded: the one who knowingly spends
precious resources on measures, knowing they won’t be effective and
will lead to greater sorrow, or the one who has the courage to make
the hard decision and reach for the real, long-term solution?
Doug:
Yes. That’s the way I see it.
L:
It occurs to me, reacting to the distinction you made earlier between
individual charity and institutional charity, that perhaps it’s like
religion. Whether we agree with their beliefs or not, it’s clear that
many people derive value from those beliefs. But when religions become
organizations and dogma sets in, they can get really destructive.
Doug:
Well, as an individual, if I come across a person who I have reason to
believe is worthy of my charity, and my trust, I might act
individually. But yes, when things get organized, they get
bureaucratized. It’s just the natural course of things; it seems
almost universal that as organizations get older and more structured,
they become counterproductive to their intended purposes.
Charity is especially prone to this problem
because of the phony ethical notions that now seem to pervade Western
society. It’s gotten worse over the last 100 years. People have come
to believe that an instrument of coercion, the state, has to take care
of them. Perversely, when the state engages in charity – which isn’t
charity, because tax-supported giving is not voluntary – it
discourages true charity. People who have money taken from them by the
taxman have less of it to give to those they might know who genuinely
need help.
L:
The Tragedy of American Compassion. Marvin Olasky.
Doug:
Great book. I think the Chinese are much more intelligent than
Westerners in this regard. The only charity you find in most oriental
societies is organized by beneficial societies that seem less pervious
to squandering. Peer pressure and moral approbation keep them in line,
unlike governments, which exist primarily to serve themselves. And
taxes tend to be a lot lower in the Orient, so people have more money
to give, if that’s their inclination.
In fact, one of the horrible aspects of this
issue, in the United States, is that large amounts of money are stolen
from estates in the form of death taxes. The idea seems to be that the
government will deploy wealth more wisely than the children of its
creators. But this is ridiculous. It’s part of the whole ethical
morass that charity and taxation are tied up in, in the U.S.
Suppose you have a Chinese and an American,
of equal intelligence, work ethic, education, skills, etc. – and an
equal amount of starting capital. The American who starts with a
dollar might end up with a million. But the Chinese guy in the same
circumstances will end up with 50 million. All because of the
difference in taxes and regulations.
But it’s worse than that, because whatever
amount of money the American is going to leave to his kids, half of it
is going to disappear down the tax rat hole, while 100% of the money
the Oriental guy leaves will go exactly where he wants it to go.
That has major implications for wealth
accumulation of the sort that, as you mentioned, The Casey Report is
designed to help people achieve. It’s another reason for the
diversification of political risk we keep reminding people is so
important.
But sadly, even if an American ends up with
$100 million, odds are he won’t leave the bulk of it intact as an
effective capital pool, to be expanded upon by his chosen heir. He’ll
give it to some charity that will be run for the benefit of its board
of directors. They get to be big shots with other people’s money –
corrupting both themselves and the intended recipients.
L:
So, the bottom line is that if you had a magic wand and could abolish
all charitable institutions with a wave of it, you’d do it. And you
would not replace them with anything. You’d use the wand to reduce
taxes and regulations everywhere, to allow for more wealth creation.
And for those few desperate cases clinging to the bottom rungs of the
social ladder, you think individual conscience would suffice.
Doug:
Exactly. To me, charity should be strictly an individual, one-to-one
thing. That’s the only way you can know that it can really help, and
even then it doesn’t always work. Once you have to hire somebody to
run a charitable organization and have secretaries and assistant
vice-presidents in charge of light-bulb changing, it’s just another
bureaucracy headed for disaster, dissipating wealth as it goes, and
doing more harm than good even among the intended recipients of the
charity.
L:
I don’t see a lot of immediate investment implications here, but
there’s certainly a lot of food for thought for those intent on wealth
accumulation.
Doug:
Let’s just say that your moral obligation to the rest of humanity –
insofar as you have such an obligation – is to keep your capital
intact. First, that means to deny it to the state, which will very
likely use it in a destructive way. Second, direct it to those who
will use it to produce more – not to unproductive consumers. Third,
take some personal responsibility, and do it yourself – don’t devolve
it upon some unknown board of worthies who will have their own ideas
about what to do with your money.
L:
Got it. Thanks.
Doug:
You’re welcome. Till next week.
But how can you make enough money to be
individually charitable and have an effect on societal wealth
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