As we have seen, one of Thomas Piketty's principal concerns is the return of what he calls patrimonial capitalism -- the domination of the economy by inherited wealth. In the United States, there is a long tradition of accumulated wealth being used to establish charitable foundations, whose purposes, at least initially, are specified by the wealthy donors, particularly in death-bed bequests, but whose programmatic giving over time has a tendency to take on a life and rationale of its own. The Rockefeller, Mellon, Ford, and Gates Foundations are among the largest and best known of more than 75,000 charitable foundations created by patrimonial wealth.
In the contemporary world, America seems to stand out in the tendency of its rich to bequeath their wealth to charitable foundations. During my quarter century of work in South Africa, I was repeatedly struck by how little there was in the way of local foundation money available for what we would think of as good works. The big mining companies offered university scholarships, but they were a form of indentured servitude, going to students of mining engineering and having attached to them a requirement that the recipients agree to work for a certain amount of time for the company. It came as a great surprise to me to discover that my tiny effort, bringing no more than $50,000 in a very good year to the University of Durban-Westville, was the largest private benefactor of the university.
There are other examples throughout history, of course, of the rich making some sort of social contribution. In the late Roman Empire, owners of the great latifundia were expected to erect statues and monuments in the local towns, and in eighteenth and nineteenth century China, the merchants who reaped enormous profits from their state-granted monopoly of the import/export trade were expected to make "voluntary" contributions for flood relief when the Yellow River overflowed its banks.
How much money are we talking about? According to a report I surfaced on the web by something called The Foundation Center, which keeps track of such things, the accumulated assets of the more than 75,000 foundations, in 2007, came to about $682 billion. This dropped the next hear to $565 billion, thanks to the market crash, but was already recovering in 2009, and by now, I would imagine, is back where it was, if not higher. By way of comparison, the endowments of American colleges and Universities total somewhat more than $300 billion.
In the continuation of my comments on Piketty, I raised a question that he does not directly address: granted that society needs capital, why does it need capitalists? The trillion dollars or so of foundation and academic endowments is a very small part of the total capital assets of American society, of course. Suppose individuals were allowed to accumulate as much as they could in their lifetimes, but were forbidden to leave it to individuals as bequests in their estates. They would either have to create genuinely independent charitable foundations or leave the capital to the American government. Suppose, in short, after some generous allowance for the family home, the family farm, the family small business, or the family car, that capital reverted to the society on the death of the owner. What would be lost, aside from the creation and sustaining of a new jeunesse dorée? What would the state do with the enormous quantities of capital it would come into by such an arrangement? Well, what do private individuals do, aside from living lives of idle luxury? The state could lend it to wannabe entrepreneurs, as banks now do. It could devote it to public works -- roads and bridges, wind farms and hydroelectric projects, space exploration and a search for a cure for cancer. Or it could distribute a portion of it on a regular basis in the form of a universal guaranteed minimum income, thus ensuring a high level of consumer demand, which in turn would stimulate economic growth.
Charitable foundations and private colleges and universities [as well as churches, of course] already demonstrate that at least some accumulated capital can be put to good uses without the active intervention of private owners of that capital. Why could we not generalize that experience?