Thanks Twiggy, but saving the world will take more than charity

Andrew and Nicola Forrest’s private company bought Akubra this week, the type of thing any Aussie would dream of doing if they had limitless purchasing power. To go with R.M. Williams, which the Forrests also own, an Akubra is the perfect clobber to wear while riding in on your white horse to save the world.

In addition to such patriotic purchases, the Forrests give millions in philanthropic commitments each year. Since signing the Warren Buffett/Bill Gates-founded Giving Pledge a decade ago, the West Australian family has been using its capital, in its words, as a force for good. This morning it is saving the climate, over lunch the oceans, this afternoon Indigenous Australia, and tonight equality for women and girls. With his boyish enthusiasm, Dr Andrew Forrest (the PhD in marine ecology came from the University of Western Australia four years ago), resembles the Australian children’s book hero Zac Power: 24 Hours to Save the World and Walk the Dog; 24 Hours to Save the World and Finish His Homework.

Illustration: Simon LetchCredit:

To take the mickey would be as Australian as Akubra or RMs, although a cheap and distracting exercise. There is something at stake here that involves our fundamental social contract.

After paying its company tax – Fortescue is one of Australia’s biggest corporate taxpayers – the mining giant distributed dividends to Tattarang, the Forrests’ private investment group. Tattarang paid no further tax on its $431 million in income in 2021-22 because it legally donated that income to Minderoo, the Forrests’ registered charity. The philanthropy, diverse in its breadth and vast in its ambition, takes the guise of an alternative government obedient to moral values such as “NEGU – Never Ever Give Up” and “Frugality – Think of Ways to Do Things Better, Faster, Cheaper, Safer”.

Rather than sinking their iron ore profits into the generality of consolidated revenue, the Forrests try to save the world now, under their control and with results they can see, instead of entrusting that work to lumbering, inefficient governments. The notion that private individuals spend their money more productively than governments – and as a force for greater good – is the same idea that underpins all tax cuts for the wealthy, including Australia’s coming stage 3. The diversion of profits from taxation to private control is as neoliberal as Ronald Reagan.

In the Australian vernacular, that was expressed most memorably by Kerry Packer, who said in 1991 that “if anybody in this country doesn’t minimise their tax they want their heads read because as a government, I can tell you, you’re not spending it that well that we should be donating extra”.

Millions of Australians, and not just those who do not depend on government welfare, also think that we would spend our income better than the Commonwealth or the states. Many would even think they could do better than the Forrests, who, a day or so before the Akubra purchase, threw their weight behind the doomed Rugby Australia chairman Hamish McLennan. This was not saving the world, but only the super-rich coming to the aid of the merely very rich, and only served to show the limits of financial muscle when Rugby Australia sent McLennan on his way.

The idea of the wealthiest functioning as a self-protective parallel government is as old as society, as economic history professor Guido Alfani wrote recently: “Throughout much of the Western world’s history, the wealthiest have been viewed in their communities as a potentially harmful presence, and they have attempted to allay this sentiment by using their riches to support their societies in times of crises like plagues, famines or wars.” When these crises occurred, the rich provided “private barns” that communities could tap into for the total good. This “tapping” consisted of mechanisms such as war bonds, increased taxation or, if the rich resisted, forced requisitioning. In return, the super-rich could save their souls and preserve their position.

Critically, there was a difference between charity – where the rich could decide how and where their donations were spent – and wider allocations to the entire community, where the rich had to surrender that control to the government of the day. For example, America’s recovery from the 1929-1933 Depression could not be achieved by philanthropy, but only by Franklin D. Roosevelt’s New Deal taxing the rich at a higher rate. When crises are all-consuming, not even the super-rich can donate our way to safety.

In the present post-COVID and war-plagued fiscal crisis, Alfani writes, we are facing a “historically exceptional development” in which that “symbiotic relationship no longer exists”.

“Today’s rich,” he writes, “their wealth largely preserved through the Great Recession and the COVID-19 pandemic, have opposed reforms aimed at tapping their resources to fund mitigation policies of all kinds.”

Many of these mitigation policies, now as then, are not tasteful or popular places for billionaires to lodge their donations. Minderoo gives to projects committed to reducing ocean plastics, helping Indigenous start-ups, bringing down rates of vaping, eliminating cervical cancer, detecting bushfires, and providing humanitarian aid to Gaza. The Forrests have a defensible belief that Minderoo’s donations and investments are a better way of spending their billions than leaving it for governments to decide. But what happens when the crisis accelerates even beyond what such alternatives governments can counter or anticipate?

Likewise, when $254 billion in tax will be left in wealthier Australians’ own hands for the decade from next year, under the stage 3 cuts, we will doubtless think we have better ideas for spending it, even if recent history suggests that we will pump most of it into unproductive asset classes like property and, if the Reserve Bank governor is to be believed, into having our hair cut and our teeth fixed. In diverting income from taxation to private control, Australia’s wealthiest will be our role models.

Whether frivolous or substantive, selfish or altruistic, the undermining of the social contract that Alfani observes over the centuries is only increased by mistimed tax cuts. “If the rich have been actively trying to avoid being made to contribute more, then they might not be doing themselves (or anybody else) a favour. In many Western countries, the electoral success of parties with a clear anti-establishment, anti-rich character most likely arises from widespread anger at an economic (and political) elite perceived as self-centred and self-serving.”

Golly – socialism! Paying tax is unpopular and unglamorous. It is rarely “better, faster, cheaper, safer”. It entrusts massive inefficient bureaucracies with the work of supporting the poor and unfortunate, with building the roads, schools and hospitals that only public funding can achieve, with keeping a country glued together.

Private philanthropy cannot do these ugly and unpleasant things that are not associated with smiling faces and grateful recipients and inspiring photo shoots.

Taken far enough, the alternative governments of the super-rich won’t be thanked by society because there won’t be any society left to thank them.

Philanthropy is a splendid thing that leaves control with the giver, certainly compared with the surrender of control in paying taxes. But without adequate taxation there is no social cohesion. Without social cohesion there are only opportunities for those who can exploit resentment. Far from praising the philanthropists for their generosity to selected causes, the populist products of social neglect will be at their gates with their megaphones and their pitchforks.

Malcolm Knox is a journalist, author and columnist for The Sydney Morning Herald.