- Published 6 Apr 2022
- Updated 7 Apr 2022
No matter how many times you read it, the statistic is staggering: the richest 1% own around 46% of the entire world’s wealth.
Even just the ten richest billionaires have a collective net worth of $1.3 trillion. The wealth these individuals possess is beyond comprehension for most of us – we simply can’t get our heads around the numbers. Against these sums, any amount we donate to charity from our personal incomes may seem insignificant. So would the most effective strategy to address global poverty be to simply redistribute as much of these billionaire fortunes as possible to the world’s poorest citizens?
In theory, redistributing all the world’s wealth could make a massive difference to those currently living in poverty. As a rough illustration, in 2020 world GDP was approximately $84.7 trillion . If this had been divided equally among the global population at the time (7.8 billion), this would have given each person around $10,860. At this amount, most people currently on the planet would have a significantly better life. Based on analyses by Our World in Data, for an average country with a GDP per capita of $10,000, average life expectancy is over 70 years, child mortality is around 1%, and virtually everyone has access to electricity. In the poorest countries today, however, average life expectancy can be below 54 years, child mortality over 10%, literacy rates below 25%, and fewer than one in ten people with access to electricity.
But are billionaires donating enough of their wealth to make a difference? Indeed, there are many exceptionally wealthy philanthropists who have already poured billions into deserving causes. Bill and Melinda Gates, for instance, have given away almost $30 billion to date, principally through the Bill & Melinda Gates Foundation which aims to fight ‘poverty, disease, and inequity around the world.’ Former New York City Mayor Michael Bloomberg, meanwhile, has poured $12.7 billion into causes focusing on the arts, education, the environment, government innovation, and public health to ‘ensure better, longer lives for the greatest number of people.’ In 1971, an endowment from American Businessman Daniel K. Ludwig established an international consortium of cancer institutes, which continues to generate world-leading research into these diseases to this day.
These pale in comparison to investor Warren Buffett, who has promised to give away more than 99% of his $80 billion-plus fortune, and has already donated over $45 billion so far, mainly towards poverty and healthcare causes. In 2010, Buffet went even further in his philanthropic zeal by co-founding The Giving Pledge, which encourages fellow billionaires to donate most of their wealth to charities. As of 2021, the pledge had 231 signatories - indicating a collective immense fortune available to donate.
It might be tempting to rely on altruistic billionaires to solve global poverty, but two key issues make this problematic.
Simply put, even all the world’s billionaires don’t have enough money to solve all the world’s problems. If billionaires were to divide their wealth among the world’s poor today (defined here as earning less than $1,200 per year), this would only equal a one time payment of around $5,000 per person - a significant amount, but nowhere near enough to lift everyone out of poverty for good. For reference, the US considers an individual with an annual income of less than $12,880 to be living in poverty. This means that, despite the substantial impact billionaires’ philanthropy could have, there is still a role for smaller donors like ourselves.
For a start, not every billionaire chooses to engage in philanthropy. In 2021, for instance, less than 9% of the world’s 2,755 billionaires had signed The Giving Pledge. Meanwhile, those that do donate are at complete liberty to give their money as they choose, without having to be accountable to anyone or transparent about how their donations are spent. There is a risk, therefore, that a billionaire donor will focus on causes personally important to them, rather than the most important ones. As an extreme example, when British antique dealer Ben Rea died in 1988, he left almost his entire $12.5 million estate to his cat Blackie, along with three cat charities.
Some may argue that higher taxes on the wealthiest citizens help to address income inequality. But tax systems in rich countries aren’t devised to help the global poor. The global poor can’t vote for legislation in high-income countries, so politicians in these countries aren’t incentivised to send money to them. Furthermore, the foreign aid budgets of these countries are minuscule, meaning that we need charity as well, not just taxes.
It’s clear that we shouldn’t wait for billionaires alone to solve poverty — their actions are oftentimes too uncertain, and likely wouldn’t be enough even if they all donated to effective charities. Small donors might not change the entire world, but they can make a world of change to those who receive their donations. Also consider this: being ‘worth a billion’ is a highly arbitrary measure of personal wealth. If you are reading this now as a reasonably well-off citizen of a developed country, then you are likely still a member of the richest 10% of the world’s population. This means that your quality of life is already drastically better than that of most people on the planet. If we truly want to address global income inequality, then we also have a moral imperative to act now. Like any habit, giving generously grows stronger when reinforced through practice: if we start now, our ‘giving reflex’ will be more developed by the time we earn more.
Furthermore, as American entrepreneur Tim Ferriss points out in a blog post titled The Karmic Capitalist, “[Empowerment] depends on acting early and precisely, not lots of money”. For instance, it costs less than one dollar to give a child treatment for parasitic worms. Analyses of this charity’s effectiveness have demonstrated that this has a significant impact on lifetime earnings, through better health and increased time in school. In comparison, the cost of treating the effects of poverty for that child (and the eventual family they may have) over decades would be considerably greater than the cost of deworming treatment.
Finally, giving to others can make us richer on so many levels beyond money. One study found that having money only increases our emotional well-being up to a point (around an annual income of $75,000). Another found that money does increase happiness, but one needs to earn progressively higher amounts to gain only small amounts of happiness.
Studies on US adults and UK citizens have found that giving to charity had positive impacts on psychological wellbeing and life satisfaction, even for donations in the $1 - $100 range. Even toddlers have been found to experience ‘the warm glow of giving’, indicating that humans have a deeply-ingrained tendency to find altruistic behaviour rewarding. This appears to be supported by studies that indicate that giving to others activates the brain’s reward centres, whilst hoarding for yourself can increase shame and stress hormone levels.
To conclude: Yes, billionaires could – and should – do a lot more to solve global poverty, but waiting for them to do so distracts us from the fact that right now many of us can significantly help improve the lives of the world’s poorest. We can make a world of difference to those who need it most, without a major sacrifice to ourselves, all while experiencing the joy of helping others. And that is an incredible opportunity.
As Anne Frank beautifully put it: "How wonderful it is that nobody need wait a single moment before starting to improve the world."