Why billionaire philanthropy might not be as generous as you think

Walmart heiress Alice Walton is one of the richest people in the world and a celebrated philanthropist, whose lifetime giving total recently hit an estimated US$1.5 billion (£1.2 billion). Her largest gift to date, US$390 million in the year to September 2023, included US$249 million for the Alice L Walton School of Medicine in her family’s hometown in Arkansas, US.

Walton’s other major philanthropic activities include founding the Alice L. Walton Foundation, to increase access to the arts, improve education, enhance health and advance economic opportunities. She also established the Art Bridges Foundation to expand access to American art across the nation. So it seems unsurprising that Forbes magazine ranks Walton as one of the 30 biggest lifetime givers in the US.

Her philanthropic efforts have also been recognised with accolades and awards: from being named one of the world’s most influential people by Time magazine, to receiving the Smithsonian Institution’s Archives of American Art Medal and the Getty Medal for contributions to the arts and humanities.

But before joining the celebrations, it is important to reflect on billionaire philanthropy for a moment.

From almost a decade of research at the Centre for the Study of Philanthropy & Public Good, it is clear that any billionaire philanthropy comes with questions about the societal costs underpinning it. In the case of huge businesses such as Walmart (a retail chain of hypermarkets, discounters and grocery shops), the sort of areas that come in for scrutiny are labour practices and the treatment of workers, the impact on communities and the environment, as well as tax practices and the cost to the taxpayer.

Such concerns are not new, of course. They are continuations of debates that go back to at least the beginning of the 20th century and the potential tensions between the business practices and philanthropic activities of major industrialists – from Andrew Carnegie, JP Morgan and John D. Rockefeller back then to Amazon founder Jeff Bezos, Meta chief executive Mark Zuckerberg or the Sackler family, founders of Purdue Pharma, nowadays.

There are also questions about the extent to which billionaire philanthropy is actually generous. While US$1.5 billion might sound impressive, it seems a bit like small change when examined more closely.

The size of the sacrifice

With an estimated net worth of US$91.3 billion, Walton has given away around 1.64% of her wealth. According to Forbes’ ranking of billionaires’ philanthropy, this puts her in the second lowest category of philanthropists: those who have given away between 1% and 4.99% of their wealth.

It makes her more generous than her older brother Rob Walton, who is classified as having given away less than 1% of his wealth, but her US$1.5 billion is dwarfed by the philanthropic efforts of some of her contemporaries, such as novelist and philanthropist MacKenzie Scott or investor Warren Buffett.

Scott, with an estimated net worth of US$35.3 billion, has already given away more than US$17 billion, or almost half of her wealth. Buffett, who has given around US$60 billion to date, has promised to give away 99% of his wealth, currently sitting at US$146.4 billion, during his lifetime or at death.

But do these philanthropic efforts actually present personal sacrifices?

It is difficult to get access to billionaires’ income data, but we can assume that a balanced portfolio for a wealthy investor can currently provide an annual return of around 5-8%. In the case of the US$91.3 billion fortune that Walton holds, this could mean an annual return of up to US$7.3 billion per year, acknowledging that depending on investment strategies and successes this might be lower or substantially higher. Compared to this, US$1.5 billion appears, once again, to be quite small.

Whether they present major or meaningful contributions for the billionaire themselves is outlined by Warren Buffett.

Buffett is a signatory of the Giving Pledge, a campaign he launched in 2010 with Microsoft co-founder Bill Gates and Gates’ then-wife Melinda French Gates as an invitation to billionaires to commit the majority of their wealth to philanthropy.

In his pledge, Buffett highlights that although he will give away 99% of his wealth, in fulfilling this pledge neither he nor his family will give up anything they will ever need or want. The remaining 1% of their wealth is sufficient – he has highlighted that “this pledge will leave my lifestyle untouched and that of my children as well”.

So it seems that while billionaire philanthropy might be impressive in absolute terms, and offers significant opportunities for addressing urgent social, cultural, economic, political and environmental challenges, in relative terms its actual contribution might be quite negligible.

This is particularly the case when you compare the societal costs associated with amassing billionaire fortunes with the societal contributions their philanthropy makes, and taking into account the wider damage that extraordinary economic inequality brings about.

So while the major sums involved in billionaire philanthropy can offer unrivalled potential for change, it is still necessary and important to ask questions about the actual significance, scale and sacrifices for all of the parties involved.

Tobias Jung does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.