Ethics @ Work: Charity for the rich

Why does society subsidize 'culture palaces' for the well-to-do?

October 26, 2007 00:27
3 minute read.
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Former US Treasury Secretary Robert Reich recently pointed out an awkward truth: lots of charitable giving is really charity for the rich: "This year's [United States] charitable donations are expected to total more than $200 billion, a record. But a big portion of this impressive sum - especially from the wealthy, who have the most to donate - is going to culture palaces: operas, art museums, symphonies and theaters where the wealthy spend much of their leisure time. It's also being donated to the universities they attended and expect their children to attend, perhaps with the added inducement of knowing that these schools often practice a kind of affirmative action for "legacies." When wealthy people give away lots of money, often they give it to institutions carefully selected to benefit only other wealthy people. In Soviet Russia, ballet and symphonies may have been entertainment for the masses, but in most wealthy countries today a middle-class person can't afford to get dressed for these events, even if he or she could somehow afford tickets. These are bastions of the wealthy not by chance but by deliberate design. Reich points out: "A while ago, New York's Lincoln Center had a gala supported by the charitable contributions of hedge-fund industry leaders, some of whom take home $1b. a year." Reich isn't objecting to these donations, only to the fact that they are indirectly subsidized through tax deductions. In fact, tax breaks are only half the story. In most countries (including Israel) operas, ballets etc. are also subsidized directly through public funds. Despite this seeming inequity, there is little public opposition to public arts spending. It seems that many people are proud to live in a city with a thriving arts scene even if they themselves never set foot in a concert hall or art museum. Even lowbrows shudder at the thought they may be living in a cultural backwater. Evidently there is some kind of hidden trickle-down from these "culture palaces." One possible kind of "positive externality" is that high culture is seen as something to aspire to. In an on-line forum discussing the UK's subsidies of the Royal Opera House, one reader commented: "I am not an opera fan but would like to reserve the right for myself and others to become one should the desire arise in the future." Probably many despicable lowbrows are grateful to be exempt from the discomfort of pretending to enjoy an opera or symphony, thanks to the social climbers willing to endure these events. An article in this week's New York Times Magazine provides another possible explanation. James Traub writes: "Thanks in no small part to the tax dollars and private beneficences of all those underage barons of Wall Street, New York is cleaner and safer, more pleasing to the eye and the nose, busier and more fun, than it was in its doldrums 30 years ago." Traub reports on the results of a recent survey that shows that on the whole New Yorkers think the city is better off for the presence of wealthy people. (Though there are exceptions, including black residents of whom 40% think it would be better if there were fewer wealthy people in the city.) These figures show the flip side of the "envy effect" about which we have written before. A growing body of research claims that people's well-being is determined at least as much by their relative wealth as by their absolute wealth. It follows that when one person gets rich it has a negative impact on the well-being of others. I'm a bit skeptical of these findings, mostly because my own research based on the World Values Survey does not corroborate them. In fact, the Times survey asked this question directly, and found that only a piddling 6% of New Yorkers claimed that seeing other people with money made them feel poor. (Of those 6%, a highly disproportionate number were from the merely rich who are resentful of the super-rich.) But even if the envy effect exists, the New York Times survey, and our everyday experience of broad support for "culture palaces" for the very rich, suggests that it is only part of the story. People also perceive an advantage in the presence of the rich, and would like to attract them to their localities. Reich's comments have much merit, and the advisability of subsidizing "charity for the rich" deserves to be re-examined. But on the whole, the topic of high culture shows that the coexistence of rich and poor is a multi-faceted relationship and cannot be viewed solely through the lens of antagonistic class warfare. The author is research director at the Business Ethics Center of Jerusalem (, an independent institute in the Jerusalem College of Technology.

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