Mother Teresa's Ferrari
What if Mother Teresa drove a Ferrari? That’s the premise of an essay by D. A. Wallach (“recording artist, investor, artist in residence @ Spotify”) to support his claim that compassionate capitalism is a scam. I’ve thought a great deal about compassionate capitalism and its many synonyms (social entrepreneurship, profit with a purpose, conscious capitalism, etc.), what it means and how we who are critical of it ought to respond. The possibility raised by the essay, that people are improperly playing up their association with charity to get rich, hadn’t escaped me. It’s obvious line of critique that undoubtably resonates with many readers.
For all the effort devoted to critical thinkpieces and takedowns across so many domains in society, politics, technology, culture and economy, a great deal of this writing seems to lack any new insights, frameworks for understanding or perspective. It’s tempting to chalk this up to lazy writers, but a more charitable possibility is that these writers just want to “have an impact”. And if your goal is to galvanize the public into action, to provoke them into opposition to, for example, compassionate capitalism, the surest way is to frame your argument to appeal to values that are widely held among your audience. If compassionate capitalism contravenes these values, it will presumably generate outrage, calls for reform, boycotts, and other forms of activism, and you as a writer can feel good knowing that you are making a difference.
However, if you as an opponent of compassionate capitalism can identify an obvious value among the public that would encourage their opposition, you can be fairly certain that proponents of compassionate capitalism have also identified it, and are well prepared with counter arguments. So although it might generate a great deal of activity and debate, the final outcome is foreordained.
For this reason, Wallach’s Mother Teresa’s Ferrari metaphor is at once persuasive and ineffective. On one hand, it resonates strongly. Researchers at Yale have demonstrated the so-called tainted-altruism effect: when someone performs an altruistic act from which they also profit, observers evaluate them more negatively than if they had acted purely out of self-interest. The researchers hypothesize that when someone raises money for the poor and then buys a Ferrari with a portion of it, it raises counterfactual questions. We tend to ask how much more they could have done had they bought more modest car. But these kinds of questions don’t arise if they got the money for the car by betting on the stock market.
The normative logic of altruism demands pure motivations. Mixed motivations are punished more harshly than selfishness. This is probably inherited from the Christian view that an individual’s acts of kindness and generosity are vehicles through which God expresses agape (unconditional love) for humanity. It follows that the encroachment of selfish motivations into altruistic acts can only be a corruption of the purity of God’s grace. However, the theological origin of Wallach’s argument is obscured and we’re left with a simple, gut-level, common sense argument: if Mother Teresa drove a Ferrari, it would bother us.
It’s compelling in its own way. The idea of a nun driving a luxury sports car seems quite strange, maybe the set up to some kind of absurd joke. But compassionate capitalists have a response at the ready: doesn’t this social convention limit the amount of good that can be done in the world? Does it really make sense to be more forgiving of someone who bought a Ferrari through stock market speculation than someone who did it by giving millions to the poor? Only a theologian would suggest otherwise.
It is certainly true, as Wallach claims, that the popularity of compassionate capitalism grew considerably after the reputation of the regular brand took a hit in the 2008 recession. Entrepreneurs and CEOs prefixed themselves with socially conscious adjectives to restore the moral legitimacy of their enterprises and let the public know they weren’t motivated by the greed and egotism that purportedly caused the crisis. But even before 2008, founders of non-profits debated whether they could scale their efforts and better achieve their social and environmental missions by doing what had hitherto been unthinkable: becoming for-profit companies and taking investments from venture capitalists, hedge funds, and the like.
The problem was how to prevent the profit imperatives from investors from crowding out or corrupting the altruistic mission. To address these pressures, the idea of mission-based business, social enterprise and the benefit corporation were created. This new way of thinking about non-profit work blurs the line between profit and altruism. It quantifies how much good a non-profit is doing, compares that with what they could do if they were a for-profit, and finds that Column B tends to be larger than Column A. But this consequentialist calculus favoring for-profit status is at odds with the public’s virtue-based approach that demands pure motivations.
The rhetoric of compassionate capitalism seeks to remove the traditional wall between altruism and egotism, allowing non-profits to become more like conventional businesses without hurting their “brand equity” as charitable endeavors. Former employees of non-profits can work for for-profit employers without feeling like they’re abandoning their idealism. But the concept permits movement in the opposite direction as well. For-profits now highlight their charitable efforts using language and marketing originally created to give moral cover to former non-profits.
What’s wrong with that? Criticism of charitable giving as a way of solving social problems inevitably runs into this objection: “But isn’t it better than doing nothing?” It’s not easy to dispute this logic. Wallach’s nun-driving-a-Ferrari scenario seems like a strong rebuke of what are effectively for-profit charities. However, it leads us into counterfactual thinking that quantifies the total amount of altruism, and this standard favors compassionate capitalism. You can probably get more “altruism” (or a reasonable facsimile) by incentivizing it.
Wallach points to an incongruity between the entrepreneur’s greed and excess compared with the deprivation of those he or she purports to help. But here, compassionate capitalists have an interesting response: profits aren’t used to satisfy greed, they’re reinvested to grow the business or to create new enterprises. What’s interesting about this is that it’s a generic statement about how capitalism works, but it’s invoked as if it’s a distinctive feature of compassionate capitalism.
Why does this happen? The critique of greed conjures up Wolf of Wall Street scenes of debauchery, excess and crime as its extreme manifestation. These are reliable sources of outrage, but as Marx knew, profits aren’t usually consumed in lavish parties. Instead, they are reinvested to produce more capital. The emphasis on greed mischaracterizes the nature of capitalism, and in an abstract debate about whether capitalism is good or not, it would be rejected by its defenders as inaccurate and unfair. But the socially conscious entrepreneur concedes this caricature and then claims “But I have created a new, more compassionate version!” And what is this new version? Simply capitalism as it has always been practiced, but now with an aura of virtue and progress for seeming to have reformed itself.
Charity, especially in its “impact-driven” mode, quantifies suffering and attempts to ameliorate it—this is a serious defect. If looking out at the world, we observe that there are many people in poverty, we should not respond by aiming for a little less. Even the goal of reducing the number to zero is suspect. The true long term objective is to make poverty impossible, even unthinkable, and to reconstruct society to make this so.
I’m not so cold-hearted as to disregard the real, quantifiable impact that charities have on people all around the world: diseases cured, meals served, wells dug, families lifted out of poverty. But non-profits (and compassionate capitalists) must also be measured by whether they are making progress towards the long-term strategic objective.
Non-profits typically don’t fare well when evaluated this way. In the US, 36% of charitable giving comes from families with a net worth under $1 million. The remainder comes from bequests, foundations, corporations and high net-worth families. Because their funding is so heavily dependent on powerful segments of society, charities avoid encouraging or supporting political activities which might threaten their wealthy benefactors. They often present social problems in ways that make elites feel good about doing a little something rather than pointing out how they are ultimately benefiting from them.
Non-profits often achieve short term quantifiable objectives that have an immediate impact—the ethical equivalent of the quarterly earnings report—but efforts toward achieving the long term objective have fallen short. In some cases, non-profits mystify and obscure the causes of the problems to avoid upsetting donors, so they may be even making things a little worse. “But isn’t it better than doing nothing?” Let’s concede that even if the strategic mission has been all but abandoned, at least they’re doing something.
But what about compassionate companies like Tom’s or Starbucks who donate a portion of their revenue to worthy causes? It’s doubtful that shifting a portion of our consumer spending to socially responsible companies who donate on our behalf will meaningful impact a problem like global poverty. Is it better than nothing? One could say that we have to start somewhere, every little bit counts and a journey of a thousand miles begins with a small step. This is the logic of quantification, where there are billions of people in poverty, and every reduction is good regardless of how it was achieved.
But the long term goal of reconstructing our world to make poverty impossible can’t be achieved that way. In fact, compassionate capitalism moves us backwards. By blurring the lines between altruism and self-interest, its advocates restore the moral legitimacy of capitalism and restore the public’s faith in it while in large part, it continues to distribute misery and suffering around the globe. Even if its philanthropic efforts are genuine and sincere, capitalism practiced out of compassion is worse than the self-interested version because it weakens our ability to address the root causes of pressing social problems.