Buffett & Gates

They’re giving it away—but not really

By Sara Flounders

Billionaire investor Warren Buffett has announced he is donating the great bulk of his fortune—$31 billion in stock holdings—to the Bill and Melinda Gates Foundation. The foundation’s current assets are already $30 billion.

Rwandan child orphaned by AIDS with his grandmother. The Gates Foundation invested $200 million in the very drug companies that stopped the shipment of low-cost drugs to African countries. Photo: UNICEF

We are told that this means that the world’s two wealthiest individuals have given the largest share of their fabulous wealth to “charity.”

The major corporate media was glowing in its descriptions of the impact that the largest philanthropic gift in history will have. According to these media, the selflessness, concern for humanity and forward-thinking global view of these multi-billionaires deserves praise and adulation.

Looking at their smiling, genial faces, who would suspect that one multi-billionaire is responsible for monopoly policies that will cost millions of lives in Africa? Or that the other is engaged, through aggressive acquisitions and mergers, in cutting the jobs of tens of thousands of workers here in the U.S. and shipping them to where slave-labor conditions predominate?

One billionaire favors the Republican Party, the other the Democrats. Both are magnanimously impartial and give a few millions to both parties.

Buffett is the founder of Berkshire Hathaway. Besides the major gift to the Gates Foundation—which is based on Bill Gates’ Microsoft fortune—Buffett is dividing $6 billion among four other charities started by his family members. Each of Buffett’s three children is guaranteed their own fortune and their own personal foundation to direct.

Great philanthropic foundations, like all charities, are intended to keep collective initiative, mass action and therefore power out of the hands of the very people they are supposedly meant to serve. They increase dependency on handouts.

In placing the great majority of their personally held wealth into foundations and trusts, Bill Gates and Warren Buffett are taking the same steps that the super-rich of past eras took.

The wealthiest corporate owners of the past had the equivalent of today’s billions of dollars earning dividends and daily interest for them. The problem was that even with manipulation of the books and all kinds of accounting tricks, some of these earnings were still taxable.

Andrew Carnegie, Paul Mellon and John D. Rockefeller—some of the first group of super-rich robber barons—all set up foundations. This legal maneuver allowed them to protect their enormous fortunes and avoid hundreds of millions of dollars in taxes while maintaining absolute control of their wealth. Today these foundations are run by the families’ personally appointed boards and make thousands of grants, large and small, to shape public opinion, define political issues and maximize the power and influence of those who set them up.

Just the interest on $1 billion—one thousand million—is far beyond what could ever be spent by themselves, their immediate families and even their most extravagant, spendthrift heirs, and that’s without ever touching the principal. Even at a modest 5-percent return, $1 billion earns $137,000 in interest every day, or $1 million in interest every week. The collective fortunes of Gates and Buffett’s—$70 thousand million—represent an obscene expropriation of resources on a global scale.

The Bill and Melinda Gates Foundation states that it is guided by the belief that every life has equal value. The goal of the foundation is supposedly to reduce inequality, improve lives, improve health and reduce extreme poverty. It focuses on fighting infectious diseases and reforming education.

Warren Buffett said that he decided to give 85 percent of his wealth to the Gates Foundation because he was so deeply impressed by the work of the foundation on a global scale. The Gates Foundation claims to have saved hundreds of thousands of lives in Africa by providing vaccines and drugs. It claims it is spending millions working on treatments for malaria, tuberculosis and AIDS.

Defending property rights

What is the reality? According to researcher and journalist Greg Palast, the policies promoted through the Gates Foundation could kill far more African people than Gates’s public relations agents claim it has saved.

Bill Gates, chair of Microsoft Corp., became the wealthiest person on the planet through his monopoly control of computer operating systems. Microsoft’s status is safeguarded by the international treaty called TRIPS, short for Agreement on Trade-Related Aspects of Intellectual Property Rights. This monopoly-protecting agreement is enforced through the World Trade Organization (WTO).

As Palast explained: “TRIPS gives Gates a hammerlock on computer operating systems worldwide, legally granting him the kind of monopoly the robber barons of yore could only dream of. But TRIPS, the rule which helps Gates rule, also bars African governments from buying AIDS, malaria and tuberculosis medicine at cheap market prices.” (The Observer, July 14, 2003)

The monopoly-protecting TRIPS agreements have been under attack by African countries that are desperate to get lower-priced drugs for the 23 million Africans who are sick with HIV-AIDS. Gates has been determined to protect this monopoly agreement at all cost.

The Gates Foundation invested $200 million in the very drug companies that were stopping the shipment of low-cost drugs to African countries. Then, spending less than 2 percent of his net worth, Gates bought medicines to distribute to dying Africans—and a lot of publicity for his work.

The foundation trumpets its lofty goals of reaching 1 million people with medicine by the end of the decade. But Gates accomplishes this by locking in a trade system that will block delivery of medicine to over 20 million people who desperately need medicine now.

Putting property rights before human rights has the unanimous support of U.S. corporations, the corporate media, foundations established by corporate wealth and both the Republican and Democratic parties.

President Bill Clinton threatened trade sanctions against Argentina for daring to sell low-cost drugs in Africa.

President George W. Bush’s grand plan to combat AIDS in Africa was to offer billions of dollars in loans at full interest to African nations. But the loans could be used only to buy patented drugs from U.S. companies at prices several times higher than generic drugs.

Buying protection

Gates learned the hard way that staying out of national politics can be costly. The Clinton administration’s anti-trust case against the Microsoft monopoly taught him the importance of spreading around millions to protect his billions.

Microsoft contributed more than $6.1 million of “soft” money to the 2000 election that put Bush in office. It was the second-largest donor to the Republican Party, exceeded only by Philip Morris. Then, under Bush, the anti-trust case was settled favorably for Microsoft.

By the 2004 election Gates was covering all the bases, making large donations to both Bush and John Kerry. Microsoft rose to the number three corporate political donor in the U.S. At its present rate of donations it is expected to become number one.

Gates also makes generous donations to the think tanks that shape public opinion, such as Americans for Tax Reform, the Cato Institute and the Heritage Foundation.

One of Microsoft’s top lobbyists, John Kelly, is a major fundraiser for Bush. Micro soft employed religious conservative Ralph Reed, formerly a leader of the Christian Coalition, as a political consultant at a $20,000 monthly retainer. Reed was on retainer to Microsoft while helping run the Bush presidential campaigns of 2000 and 2004.

Microsoft also retained the now-indicted lobbyist Jack Abramoff and gave indicted Tom DeLay a $10,000 campaign contribution. His Gates Foundation also gave the DeLay Foundation for Kids a $100,000 donation.

Both Gates and Buffett have taken full advantage of the elimination of almost all restrictions on personal wealth. They are the greatest beneficiaries of Bush’s cuts in taxes to the super-rich.

Gates has been spending $20 million a year on federal lobbying and campaign donations. This was a tiny fraction on the return he received in lowered taxes. After Bush cut the 35-percent tax rate on dividends down to 15 percent, Microsoft issued a $32 billion dividend to its shareholders.

Paper cuts

Warren Buffett certainly seems to hold liberal views on most social issues. For a multi-billionaire, he lives rather modestly in a home he bought decades ago. He is described as a very talented investor. His wealth is described as coming from a series of paper transactions—acquisitions and mergers.

But paper transactions in the capitalist system have a devastating impact on millions of working people. Buffett’s talent is finding companies to buy, and then increasing profits at these companies through big layoffs and ruthless reorganization and restructuring. His talent is the ability to see where assets can be maximized.

Workers have no voice and no rights in this process. Companies where they have spent their lives are suddenly downsized. Whole industries are moved abroad. Homes in small towns and cities, where workers have spent 30 years paying off a mortgage, are suddenly worthless because the plants have closed. Entire towns and regions dry up without their industrial base.

Investment analyst Jonathan Davis described how Buffett organized his operation. Berkshire Hathaway, Buffett’s holding company, owns outright a whole string of industrial, retail and insurance companies. The cash generated from the insurance companies, such as Geico, provides the capital that Buffett and his partner, Charlie Munger, use to invest.

The drive of the whole capitalist system is to maximize profit. Regardless of how good, bad, generous or stingy Buffett is personally, his investors must be satisfied. He has to increase the per-share value of Berkshire Hathaway. That can only be done by ruthlessly lowering labor costs—through technological improvements, new inventions or finding cheaper labor. All these processes in the capitalist system can involve huge layoffs.

Investors are interested in putting their money into Berkshire Hathaway because they will earn more. As soon as the rate of return drops by even half a percentage point, they will withdraw their money and go elsewhere.

Berkshire Hathaway was originally a textile-manufacturing firm in New Bedford, Mass. Buffett bought it and eventually put its 425 workers out of work. He then used the shell of the company to acquire a fortune. He was on his way. He has repeated this hundreds of times.

When he purchased Fruit of the Loom in August 2004, the workers at the plant in Cameron County, Texas, reportedly cheered. They had all heard that Buffett was smart and super-rich. They didn’t expect him to double profits by eliminating the jobs of the 800 workers. The reorganization of Fruit of the Loom also meant the closing of a yarn factory in Rabun County, Ga.

Buffett engineered the merger of Gillette, where he had become the largest shareholder, with Procter & Gamble. The consolidation meant a $645 million profit to Buffett and an initial cut of 6,000 jobs. More layoffs are planned.

Buffett understands the global market. His wealth is bound up with the wholesale attack on workers’ living standards in the U.S. that began during the Reagan administration. In 1983 Buffett was worth $620 million. By 1989 this had grown to $3.8 billion. Another 12 years and he was worth more than 10 times that amount.

Capitalism and poverty

But the larger question is can the capitalist rulers—even if they had the best of intentions—end poverty and inequality? Can the Bill and Melinda Gates Foun dation bring about a society where every life has equal value?

For the Microsoft Foundation to thrive, companies like Microsoft and Buffett’s Berkshire Hathaway must answer to an interlocking corporate network of bank ers, brokers, investment companies and shareholders who demand maximum profits. And profits can grow only by exploiting labor.

This means continuing to do what Buffett did in gathering his fortune. It means creating poverty, pain, layoffs and massive insecurity. The gap between the rich and the poor will continue to widen. By every measure under capitalism, the rich really do get richer and the poor get poorer.

When productivity increases, what happens? The workers are paid a smaller part of what they produce. The capitalists, whose wealth comes from taking a larger share of what workers produce, will with each breakthrough in technology increase their portion of the value the workers produce. The more productive labor becomes, the wider the gulf grows.

Today the gap between rich and poor is greater in the U.S. than in any other industrialized country in the world. One percent of the population owns half the wealth of the country. Globally, 200 billionaires own more than the 2 billion poorest people. A third of these billionaires live in the U.S—yet even here, 20 percent of the children live in poverty.

By every measure the gap is widening. Twenty-five years ago a typical CEO of a large corporation earned 40 times as much as the average worker. Today the CEO earns 400 times more than the average worker.

On a world scale, poverty is greater than at any time in human history. Some 1.1 billion people are desperately struggling to survive on less than $1 a day. About half the world’s people, some 3 billion, exist on less than $2 a day. Per-capita income has actually fallen in 50 countries in the past decade. Every year poverty on a global scale increases—as does extreme wealth.

The alternative

It doesn’t have to be this way. There is one small country that has put into practice the lofty goals of the Gates Foundation to “reduce inequality, improve lives, improve health and reduce extreme poverty.”

Socialist Cuba has a gross national product of only $10 billion—less than 15 percent of the Gates Foundation’s assets. Nevertheless, its health care system is world renowned and it has an infant mortality rate lower than many U.S. cities. Its educational level is the highest in Latin America. This is considered such a dangerous example that a U.S. blockade of Cuba has been in place for 46 years.

Incredible progress has been made in this relatively poor and once technologically backward country—especially in education, health care and culture—through the collective action of its whole population. The Cuban Revolution broke the hold of the few multi-millionaire owners. Cuba’s workers and farmers don’t rely on charity. They are the owners of the country’s wealth.

Cuba sends more than 20,000 medical professionals a year to Third World countries, far more than the World Health Organization or any foundation. Its goal in Latin America and the Caribbean is to train a total of 100,000 doctors from the region, for the region.

Cuba’s pharmaceutical industry is at the forefront of developing inexpensive drugs for diseases that are the most common scourges in much of the world.

The Cuban experience has demonstrated just how solvable the problems of world hunger and disease are. The real challenge is how to break the hold of a capitalist system that enriches a handful and brings ruin to millions.

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