THE BLOG
11/02/2006 03:54 pm ET Updated May 25, 2011

Exploding Philanthropy: Moguls Spur a Rich and Unregulated Marketplace

When Forbes released its annual list of the 400 richest Americans in September, nine figures not longer cut it: the list was made up entirely of billionaires. It's true, the economists confirm, the rich really are getting richer - and they're getting richer faster.

And as the ranks of the wealthy swell - there are more than eight million millionaires now in America - the ways in which they take advantage of their wealth are changing. The surge in luxury goods, the myriad travel opportunities, the lifestyles and real estate are all part of it. But so is philanthropy.

As I've argued here before, modern philanthropy is inherently a consumer marketplace - and in the upscale reaches where mall-hoppers and Chevy drivers don't venture, it's as aspirational as anything else. As Women's Wear Daily said in a special report on luxury consumer goods and causes last week: "[upscale] companies are mining a new cultural mind-set and giving consumers a chance to feel virtuous about an upscale product they purchase."

To put it another way: Bill Gates alone is a phenomenon. Bill Gates and Warren Buffett together constitute a trend - and this is one trendy crowd.

Coupled with moguls like Gates, Buffett, Sir Richard Branson, and the founders of online powerhouses like Google and eBay, stars like Bono, Oprah, Lance Armstrong, Tiger Woods, and Brad Pitt add a consumer-friendly, front-page brand of philanthropy - stylistically a cross between the sidewalks of Beverly Hills and the lobby of the Ford Foundation. Like all luxury consumer brands, this surge in upscale philanthropy has one clear message - "be like us."

Or to be more precise: "give...and be like us."

Americans are hearing that message. Even before the Buffett gift, before Gates stepped down as day-to-day CEO of Microsoft to manage his philanthropy full-time, before Bill Clinton launched his billion-dollar initiative, the trend lines were clear. Not only has total philanthropy increased - to $260 billion in 2005, according to Giving USA's annual date - but wealthy Americans are becoming increasingly involved and sophisticated in their giving. A year ago, Barron's reported that over the previous six years, the number of family foundations nationwide increased by more than 60 percent and were expected to increase to more than 33,000.

Part of it is pure opportunity. In a society where philanthropy is expected - and America is the most philanthropic society on earth - the market of donor opportunities is ever-expanding. Every day in this country brings 115 new nonprofits, not including religious organizations. There are more than a million registered 501c3 organizations. They're springing up faster than would- be stars on American Idol - and they have, frankly, every bit as much of a chance at permanence and scale. And it takes permanence and scale to change the world.

On the opposite side, there has never been a larger, winder, more diverse donor pool. And that's just the rich; the rest of us are also giving more, just in smaller increments. But consider the wealth available to today's nonprofit causes. The number of households with $5 million or more in investable assets -- excluding the family home -- rose by 26 percent to a record 930,000, according to a study by Spectrem Group. An analysis of income-tax data by Congressional Budget Office released early this year found that the top one percent of households own nearly twice as much of the nation's corporate wealth as they did just 15 years ago. Another study by the Center on Budget and Policy Priorities and the Economic Policy Institute found that the income gap between the poorest fifth of Americans and the richest fifth has grown rapidly (some would say alarmingly) in the last quarter century. Within the top fifth of families, the study found that the wealthiest families enjoyed the highest income growth over the past two decades. In the 11 states that are large enough to permit this calculation, the incomes of the top 5 percent of families rose between 66 percent and 132 percent during this period. For the bottom fifth of families in those states, income growth ranged from 11 percent to 24 percent.

Think of the numbers for a moment - hundreds of billionaires, almost nine million millionaires, tens of thousands of incorporated family foundations. All trying to be like Bill? Or Warren? Or Lance? You get the idea - it's a lot of giving power concentrated in one growing, but still narrow, segment of our society of 300 million strong.

We're going to the polls on Tuesday. On the right, candidates vow to cut, cut, cut taxes - they rarely discuss services. On the left, candidates pledge not to raise taxes. The danger is that that used to be compulsory in supporting the needs of society becomes purely voluntary. And as any philanthropist will tell you, not only is their giving aspirational - it's darned personal well. You and I have little to say about it.

Last month, former Deputy Treasury Secretary Robert Reich took one look at the Global Initiative run by his former boss in the White House - and called for a return to the good old days. You may not agree, but it's food for thought:

I think it's wonderful that the world's biggest billionaires are devoting a portion of their fortunes to good causes ... I remember a day when government collected billions of dollars from tycoons like these, as well as from ordinary taxpayers, and when our democratic process decided what the billions would be devoted to ... Now, the moguls pay an effective rate of about 15 percent of their incomes. They don't pay anything at all if they have clever enough accountants and lawyers to park their loot in tax havens. Their capital gains taxes have been lowered, and their estate taxes are being phased out. What's more, they're richer today than ever before in history.

And what of government? Now, according to surveys, two-thirds of Americans don't trust government to do anything right. So perhaps it's understandable that nowadays we have to rely on the generosity of tycoons. When they decide to devote some of their billions to what they consider to be worthwhile causes, we applaud their generosity.

I don't want to sound like an ingrate or overly sentimental, but I preferred it the old way.