The Daily Beast
Photo Illustration by The Daily Beast / Photo via APWhen former Enron trader and billionaire hedge-fund manager John Arnold and his wife, Laura, announced plans to donate 5 percent of their net worth to charity every year, they may have expected a pat on the back. This did not happen.Instead, philanthropy and income inequality experts criticized the gesture on social media and in MarketWatch, pointing out that the donation would barely dent the couple’s bloated $3.3 billion fortune. The Arnolds framed the commitment as a way to accelerate donations to working charities, but critics argued that without substantially diminishing their fortunes, the annual gift would likely have limited impact on the status quo.“It’s laudable, but it’s just that they want to do that while maintaining their wealth and power,” nonprofit consultant and podcaster Nia Wassink told MarketWatch, “and that for me is what’s mutually exclusive.”Chuck Collins, director of the Program on Inequality and the Common Good at the Institute of Policy Studies, told The Daily Beast he also applauded the Arnolds’ effort to donate annually, but that it did not go far enough. “If they want to impress those of us who don’t think that growing billionaire wealth is a good metric—and it is not a good metric for our society right now—[and] if the Arnolds want to be on the side of reducing inequality, then they’re going to have to dig deeper,” Collins said.The Arnolds’ commitment came as part of the “Give While You Live” campaign, launched by the international anti-poverty nonprofit, Global Citizen, in coordination with Warren Buffett and Bill and Melinda Gates. The Arnolds declined to comment for this article, but David Hebert, communications manager at the couple’s philanthropic Arnold Ventures, told Market Watch that the campaign “is about encouraging the world’s billionaires to do more in regards to charitable giving and to move forward with a sense of urgency.” The goal is to commit billionaires publicly to donating the majority of their fortune to nonprofit and charitable causes over the course of their lifetime, rather than after they die.Health Care Billionaires Outstrip Even Tech Titans During COVID BoomThis is harder than it sounds—in part because the assets of the ultra-rich grow in value so quickly, just from sitting around. Based on their current net worth, the Arnolds would give approximately $165 million their first year—which sounds substantial. But as Wassink pointed out to MarketWatch, even with annual donations and assuming a 6 percent growth rate, the Arnolds’ wealth would still increase by another $974 million over the next 25 years.A study released Thursday from the Program on Inequality and the Common Good, which looked at billionaire wealth over the past 31 years, found that the collective wealth of American billionaires had grown enough in the past 13 months alone to cover nearly 70 percent of the bill for Joe Biden’s proposed American Jobs Plan, which will cost $2.3 trillion over 10 years. Since the start of the pandemic, domestic billionaires added some $1.62 trillion to their total fortune.As of Monday, the report found, the 719 billionaires in America were worth a collective $4.56 trillion—more than four times the wealth held by the 165 million people who make up the lower 50 percent of Americans. “That’s the absurdity of surging billionaire wealth right now,” Collins said.Benjamin Soskis, a senior research associate at the Center on Nonprofits and Philanthropy at the Urban Institute, told The Daily Beast that the Arnolds’ announcement came at a moment of internal reckoning in philanthropy. As income inequality skyrocketed in recent years, the dominant attitude shifted away from distributing small sums of vast personal fortunes, and towards actively dismantling the power imbalances that made those gifts possible.“If you’re a billionaire, you have all this power, and that's fundamentally illegitimate,” Soskis said. “There’s a pretty powerful critique that, for giving to be legitimate, it has to result in some diminution of status or power of the giver. That's what philanthropy should do—make it so there’s no longer huge disparities in wealth and power, slowly drain yourself of the funds that would allow you to be a philanthropist.”John Arnold first made news in the finance industry as a young trader at Enron, where he earned the biggest bonus ever given to an employee and the nickname “the king of natural gas.” Arnold left the firm before its catastrophic end, escaping any accusations of wrongdoing, to start his own hedge fund. The firm, Centaurus Advisors, went on to buy a 10 percent stake in the National Coal Corporation, before shutting down in 2012.In 2010, three years after Arnold became the youngest billionaire in America, the couple formed the Laura and John Arnold Foundation, which was worth an additional $2 billion as of 2019, and ramped up their philanthropy. They focused some of their donations on efforts to lower pharmaceutical drug costs and reform the criminal justice system. They also financed more controversial measures—including a donation to the Baltimore Police Department’s aerial surveillance program, which was sued for invading civilian privacy in 2020 (a judge later found the program constitutional).Thomas Piketty on Why Capitalism Isn’t Evil and Billionaires Can Still ExistThe Arnolds have given more than the promised 5 percent of their wealth in prior years. In 2020, Forbes included them alongside George Soros and Warren Buffett on a list of billionaires who had given away 20 percent of their wealth. At the same time, they have also drawn criticism for converting their foundation into a limited liability corporation, which requires less transparency about the destinations of their gifts.The Arnolds’ commitment to donating 5 percent of their net worth annually ties into some of their other activism to reform philanthropic requirements. Last year, they joined several other foundations to launch the Initiative to Accelerate Charitable Giving, which proposed a series of reforms to expedite the transfer of donor funds to working charities. As part of that initiative, they have pushed to increase the mandatory annual payout for private foundations from 5 percent to 7 percent, and to accelerate contribution timelines from donor-advised funds.Like those efforts, Soskis said, the Give While You Live pledge reflects a heightened sensitivity to the importance of timeliness when donating large sums. In earlier iterations of the Giving Pledge, participants could fulfill their commitment at death—waiting decades to give a lump sum by bequest.“From a nonprofit’s perspective, that’s not ideal,” Soskis said. “Nonprofits need funds in the moment, and [waiting] retains the power in the hands of the donor and postpones the moment of giving. So the new element of the Global Citizen campaign and the Arnolds’ 5 percent campaign is that it harkens back to religious imperatives like tithing, which requires you to make some kind of annual contribution.”But with billionaire wealth rising as rapidly as ever, the gesture may not earn them much absolution. Laurie Styron, executive director at the philanthropy watchdog group CharityWatch, told the Daily Beast that Americans have historically donated 3 percent of their annual income to charity. But even as the affluent’s share of wealth grows, the poor and middle classes give a higher percentage of their income on average, though the wealthy may not be impacted by the loss of resources in any tangible way.“I think this is why the general public is becoming less impressed with these types of giving pledges,” Styron said. “[They] have become the public's baseline expectation of the wealthy, as opposed to being thought of as acts worthy of undying gratitude and praise.”Read more at The Daily Beast.Got a tip? Send it to The Daily Beast hereGet our top stories in your inbox every day. Sign up now!Daily Beast Membership: Beast Inside goes deeper on the stories that matter to you. Learn more.