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A new altruism: Lessons from Andrew Carnegie

AUTHOR: Professor Timothy Devinney   DATE: 01.05.05   ISSUE 1, 2005

The 20 richest Americans allocate an average 14.45% of their net wealth to charity, while the largest Australian donors give just 4%.

Australian millionaires donate less than 2% of their income, compared with American millionaires' average 3.5% and Canadian millionaires’ 3.2%.

What made Andrew Carnegie outstanding is not amazing riches, but the philanthropic system that saw him give away nearly all his money in his lifetime.

If the industrialist Andrew Carnegie was around today, he might ask our increasingly prosperous individuals why they’re holding back.

In his day Carnegie was the wealthiest man in the world – in relative terms, Bill Gates’ billions equal approximately half of Carnegie’s wealth. What made Andrew Carnegie outstanding is not amazing riches, but the philanthropic system that saw him give away nearly all his money in his lifetime.

"Australian millionaires donate less than 2% of their income;American millionaires average 3.5%."

ILLUSTRATION: Gregory Baldwin

By the time of his death in 1919, he had given away US$350,695,653 with the remaining US$30 million disbursed to foundations, charities and pensioners in his will. Smaller bequests went to his wife and daughter.

Carnegie’s philosophy was espoused in his book, The Gospel of Wealth. He saw wealth creators as “trustees of the surplus” responsible for ensuring that their money was used “to stimulate the best and most aspiring poor of the community to further efforts for their own improvement”.

Recent research has shown that richer individuals are less likely to use a cash windfall philanthropically than others.

The benefits of his approach are worth recalling. I was born in Pittsburgh into a second-generation Irish immigrant family. As a young child, I visited the Carnegie Institute to view the dinosaurs and artifacts. In high school, I worked on my essays in the Carnegie Library before attending Carnegie-Mellon University on a full scholarship, an education that was beyond my family’s means. (My father works as a security guard at the Carnegie Library). At university, I worked for US Steel, the child of Carnegie’s company, before moving onto the University of Chicago, a school effectively founded on bequests by John D. Rockefeller, a Carnegie contemporary, on yet another full scholarship.

As the corporate social responsibility debate gains momentum, Carnegie’s legacy shows the difference individual “trustees” of wealth can bring to a society. In the aftermath of the Indian Ocean tsunami, corporations proved slow to contribute, in contrast to the overwhelming response from individuals. Curiously though, recent research has shown that richer individuals are less likely to use a cash windfall philanthropically than others.

"What stands out is that we have no Carnegie-style revolutionaries providing philanthropic leadership."

PHOTO: Taek Yang (Professor Timothy Devinney)

Where are Australia’s great “trustees of the surplus”? Despite our vast wealth, why is it we have no Andrew Carnegies? The argument promoting the differences between America and Australia doesn’t work. There are clear parallels. Like America, Australia is a land of immigrants. In Pittsburgh, I grew up in a neighborhood populated by Poles, Germans, Italians, Blacks, and Irish. Today I live in a Sydney suburb with neighbors from Japan, Ireland, Syria, Korea and Croatia. Carnegie himself was an example of how immigrants reward a society for the opportunities it delivers.

What stands out is that we have no Carnegie-style revolutionaries providing philanthropic leadership. Without being shown the way, there seems little doubt that other industrialists like Rockefeller, Stanford or Vanderbilt, would have been so generous. Indeed, in 1904 international newspapers kept a tally as to who was giving money away faster, Carnegie or Rockefeller!

"Let us hope that the acquisitive streak in our culture will be matched by a new altruism."

These visionaries were not buying fame with “do good” causes, either. Many of the great institutions they founded were considered follies or politically incorrect. Carnegie established the Carnegie Endowment for International Peace, and the International Court of Justice and the Permanent Court of Arbitration in The Hague in the early 1900s, a time when aversion to war and belief in arbitration had no currency, and this earned him the derision of many politicians. Similarly, his library endowments to Black universities and communities in the US South were hardly meant to endear him to local White political leaders.America’s philanthropic tradition is built on the model established by a Scottish immigrant who started as a bobbin boy in a textile factory and was self-taught in subsidised libraries. His brand of philanthropy was unrelated to tax minimisation or gaining social legitimacy; it was neither Branson-esque promotion nor corporate cause-related marketing.

Australians are justly proud of their cultural diversity and their economic success, particularly in the last 14 years – although the words of Ron Chenow in a 1999 New York Times editorial bemoaning America’s philanthropic downturn seem eerily germane to here and now:

"Truly meaningful philanthropy does not come from corporations, prompted by tax breaks, investment vehicles and political initiatives, but from individuals."

-- Nearly 20 years of high employment, low inflation, steady growth and a booming stock market (the great American antidote to class conflict) have dulled demands for inventive, large-scale philanthropy… Let us hope that the acquisitive streak in our culture will be matched by a new altruism. Otherwise, history may stigmatise us as a second Gilded Age, but one devoid of the audacious giving that proved the saving grace of the first.

-- Australia focuses mainly on corporate giving, when truly meaningful philanthropy does not come from corporations, prompted by tax breaks, investment vehicles and political initiatives, but from individuals who take their “trusteeship of the surplus” seriously.

-- Like Carnegie, these people do not wait to pass their money to a soulless corporate foundation that was never acculturated to the donor’s vision or given access to the vast skills and capabilities that created the wealth in the first place.

So, my question is: where are they?