Hijacking Philanthropy to ‘Reimagine Capitalism’

The Hewlett Foundation proves again that Joseph Schumpeter was right

WSJ editorial.

"The 20th-century economist Joseph Schumpeter famously wrote that capitalism sows its own destruction by creating a knowledge class who despise its success. Behold the Hewlett Foundation and Omidyar Network’s $40 million gift to the paupers at Harvard and MIT to “reimagine capitalism.”

Bill Hewlett and David Packard founded Hewlett-Packard in a one-car garage in Palo Alto and made it one of the world’s storied companies. Its capitalist success created wealth for shareholders and stakeholders alike, and Hewlett established his foundation to share even more of it. But his philanthropic legacy has become one more sad example of how the wealth of capitalist donors is hijacked by future generations of knowledge-class progressives. 

“For more than 40 years, neoliberalism has dominated economic and political debates, both in the U.S. and globally, with its free-market fundamentalism and growth-at-all-costs approach to economic and social policy,” the press release says. It “offers no solutions for the biggest challenges of our time, such as the climate crisis, systemic racism, and rampant wealth inequality—and in many ways, it has made those problems even worse.”

Actually, capitalism offers solutions to all of those challenges. The largest reductions in carbon emissions have come from natural gas, thanks to the market innovation of shale fracking. Competitive labor markets have helped minorities rise despite residual racism because bigotry is too expensive. The wealth created by free markets and innovation, along with global trade, has lifted billions out of poverty. Extreme global poverty has plunged to less than 10% from 45% in 1980 while world GDP has more than tripled.

We now have fast broadband and smartphones that connect with others anywhere, anytime; 24-hour home delivery of almost anything we want; breakthrough medical treatments and vaccines; genetically engineered crops that have increased farm yields and global nutrition; cheap energy thanks to an oil and gas shale boom; and a rising standard of living for most of the world. Socialism didn’t build that.

Yet as Schumpeter predicted, people in the comfortable West, including many tech entrepreneurs, now take this prosperity for granted. “Neoliberalism’s anti-government, free-market fundamentalism is simply not suited for today’s economy and society,” says Larry Kramer, president of the Hewlett Foundation.

By “reimagining capitalism,” as the press release advertises, what these foundations really mean is putting politicians and the administrative state in charge of redistributing more of its proceeds. Yet if they had been paying attention in recent years, they might have noticed that “free-market fundamentalism” could have spared the U.S. from some terrible mistakes.

For example, when government pays people not to work, many don’t work. When government increases taxes and regulation, output declines. And when government floods the economy with money, inflation breaks out. Is 7.5% inflation helping “wealth inequality”?

The Hewlett and Omidyar grants will fund left-wing academics at the Harvard Kennedy School, Howard University, Johns Hopkins, MIT and the Santa Fe Institute to “rethink and replace neoliberalism.” As if these institutions need more money to indoctrinate young people in socialism. Endowments at Harvard ($53.2 billion), MIT ($27.4 billion) and Johns Hopkins ($9.3 billion), by the way, are swelling—thanks to investment in capitalist markets.

The Hewlett Foundation’s hard left turn is a warning to today’s successful capitalists to be wary of creating foundations or other vehicles that outlive them. Sooner or later, most of them are taken over by people who steer them for their own political purposes no matter the founder’s intent. Be careful not to finance the destruction of the system that made business success and wealth creation possible."