
Are Rich People Parasites? - nickb
http://www.mises.org/story/2700
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mynameishere
_Lewis suggests that donors to charity be able to deduct the full amount of
their contribution from taxes_

This brings up a comparison in my mind: Bill Gates (philanthropist) vs Paul
Allen (investor). Whose post-Microsoft activity is more valuable? Who should
be able to deduct more off of his taxes due to his cash distributions?

Gates seems like a nice guy...but I think that's what he's going for: To make
me (and the federalis) think he's a "nice guy". History has shown rather
completely that charity is useless or harmful. Investing in companies, by
contrast is useless or useful. I don't think we should encourage policies to
make Paul Allen, like Gates, throw his money away rather than utilize it.

~~~
nostrademons
"History has shown rather completely that charity is useless or harmful."

Oh?

Anyone here go to UChicago? That was Rockefeller's philanthropy. How about
CMU? Carnegie-Mellon. Who watched Square One as a kid? Also Carnegie & Mellon.
Ever aspired to being a Nobel Laureate? Alfred Nobel, the person who got rich
off dynamite. The math competitions I went to were sponsored by a variety of
corporate charities. The Intel and Westinghouse science competitions are Intel
and Westinghouse's charitable programs, respectively. Olin College was started
by liquidating the Olin Foundation.

My high school was started with a grant from the Annenberg Foundation. I
credit it with getting me interested in startups in the first place. It's now
doing teacher training with a $500K grant from the Gates Foundation.

One of my mom's friends is involved with schools in Africa. She says that the
Gates Foundation has made a _massive_ difference over there. Children who
would otherwise die from childhood illnesses are going to school, learning to
read and write, and even learning how to use computers.

I think a better lesson to draw from history would be that attempts to
distribute money are always fraught with unintended consequences, so tread
carefully. However, you don't get to be a billionaire if you're _not_ careful
with money. Gates and Rockefeller and Carnegie don't need our advice on how to
put their money to good use. I'd hardly say that Gates is "throwing away" his
money.

(Paul Allen, OTOH - really, can you say that the Portland Trailblazers are
worth more than saving 70 million kids from measles?)

~~~
mynameishere
To be sure, when I said "philanthropy" I implied the "giving to the poor"
variety. Schools and Universities for whatever reason don't seem to spring up
through the profit motive [1], and so giveaways of various kinds are typical.
Many universities sprung up from Churches but that doesn't validate all the
quantifiably harmful activities of churches. More to the point:

 _She says that the Gates Foundation has made a massive difference over there_

Here's the thing: MAYBE Gates manages his money better than everyone else. I'm
willing to accept the possibility, but I doubt it. It's always nice to hear
that such-and-such is going well, but when it comes to massive boondoggles,
you're unlikely to hear anything else. "Yes, yes, all the billions were well
spent." The problem is, Africa is dirt poor despite endless charity from the
west.

<http://en.wikipedia.org/wiki/List_of_countries_by_GDP_>(nominal)

I'm inclined to look at verifiable results rather than anecdotes. Here's the
question: Do you think the presence of a well-run Emerging Markets investment
fund through Gates' money would help Africa more or less than free Vista-
loaded computers?

[1] I don't know why this is. Why is CMU better than Devry? The best single
answer is: Reputation. I'm inclined to bet of the free market, but educational
systems seem resistent to the free market.

~~~
nostrademons
"Do you think the presence of a well-run Emerging Markets investment fund
through Gates' money would help Africa more or less than free Vista-loaded
computers?"

Until Africa has the institutions necessary to support a free market, Gates's
philanthropy (which actually is aimed more towards health and basic literacy
than free computers) is _much_ more useful than an Emerging Markets fund.

Many die-hard free-marketers don't realize this, but markets require
_significant_ institutional support before they even become workable, let
alone efficient. You need private property rights. You need contract law. You
need courts that enforce laws in a predictable, non-arbitrary way. You need
literacy. You need a culture that believes that it's worth sacrificing today's
pleasure for tomorrow's happiness. You need a rational belief that there
_will_ be a tomorrow, and you won't die from some random illness or machete-
toting warlord in the meantime. You need transportation infrastructure to move
goods and services between locations. You need a stable currency that's
accepted by everyone you're likely to do business with and won't be
hyperinflated away on a warlord's whim.

Africa has none of these.

So pouring _any_ sort of money into Africa, whether it comes from charitable
donations or a hedge fund, means pouring it down a black hole. There's nothing
special about the private sector that makes it immune to this. Normally,
private firms do better because ones that fail get replaced by ones that
succeed. Well, fine. They'll all fail, as will all their replacements.

Gates is working at trying to supply the basic infrastructure necessary for a
market economy to emerge. In order to have markets, you must have contracts
and private property. In order to have contracts, you must have literacy. In
order to have literacy, you must have education. In order to have education,
you need a reasonable belief that you won't die next week from a random
illness.

So the Gates Foundation starts the process there: ensure that people have a
reasonable belief that they won't die next week. It finds villages that
already have a reasonably stable food supply and are not in the middle of a
civil war (those, for the moment, are beyond help unless you get the U.S.
military involved). It then vaccinates the children, installs pumps for clean
water, teaches them some basic sanitation rules like "don't shit upstream of
your water supply", and so on.

Education only becomes realistic once children have a reasonable expectation
that they won't die. Once they do, you can work on literacy. Once you have
literacy you can try to change the institutions of the host country. More
likely, you'd want to get some small-scale trade going among villages and
between villages and the West. This is why the Internet is potentially so
important over there - it lets African villagers bypass the corrupt warlords
and governments above them.

But not before they have the basics down. It's meaningless to speak of an
Emerging Markets fund going into many African countries. There's no market at
all, let alone an emerging one.

~~~
mynameishere
_Africa has none of these._

Wrong. South Africa is a passably modern country, and it became that way
through its sheer money-making opportunities. The existence of rich resources,
mixed with a decent climate made SA more workable than other countries. The
Africans in SA didn't need handouts in order to work in mines. But currently,
you have two types of prospering Africans in SA: Those who made it on their
own, and those who received "handouts" from the affirmative-action-drunk post-
Apartheid government. Guess which group _might_ eventually sink the ship?
Which sunk Zimbabwe?

Improvement comes through mutually beneficial exploitation, like it or not.
I'm an asshole, but I'm right. My (little) money's where my mouth is: Almost
all of my investments are in foreign companies, with a large share in
undeveloped countries. I've done quite well... I don't give a fly about
Africa's well-being (believe me), but there's growth opportunities there.

~~~
nostrademons
I thought I'd left in a clause where I excepted a few African countries, but
it looks like I edited that out. There are _some_ African nations that are not
doing too poorly. South Africa, Egypt, to a lesser extent Kenya, Botswana, and
Ghana. What I wrote above does not apply to them.

I'd very much disagree about your assessment of why South Africa developed,
though. The rest of Africa is rich in resources too, and many of them have
free (as in lack of regulation) markets.

South Africa became a passably modern country because it was colonized by the
British. Unlike other European colonial powers, the British brought their
institutions with them _and trained the local natives to govern them_. When
other European colonial powers pulled out, they took all trained
administrators with them.

Take a look at the list of British colonies in Africa
(<http://en.wikipedia.org/wiki/Decolonization_of_Africa>): Egypt, Sudan,
Ghana, Cameroon, Nigeria, Sierra Leone, Tanzania, Uganda, Kenya, Malawi,
Zambia, Gambia, Botswana, Lesotho, Mauritius, Swaziland, Zimbabwe, and South
Africa. Now take a look at the most successful economies in Africa
(<http://en.wikipedia.org/wiki/Africa#Economy>): South Africa, Botswana,
Ghana, Kenya, Cameroon, Egypt, and until recently, Nigeria. Notice any
similarities?

~~~
mynameishere
_the British brought their institutions_

Shopkeeping. Checkmate.

