Marlene Engelhorn's redistribution as a role model?

Zewo seal of approval

The young Viennese heiress of millions Marlene Engelhorn thinks her large inherited fortune is unfair. She wants to donate a large part of it - at least 90% - and draw as much attention as possible to the unequal distribution and low taxation of wealth. A citizens' council initiated by her - the Gute Rat für Rückverteilung (Good Council for Redistribution) - is now to distribute 25 million euros from her inheritance - which remained untaxed in Austria due to a lack of inheritance tax - in a democratic decision-making process.

This extraordinary initiative has already attracted a lot of media attention and is being widely discussed - including here at Effektiv Spenden. Because we also have a Donor Advisory , I often have to deal with people who ask themselves similar questions to Marlene Engelhorn. After all, she is not the only millionaire who is highly privileged by international standards, even if her assets are much smaller or if she is only looking at her annual income. The majority of people in Austria are among the richest 5% the world.

In the following, we share our assessment of Engelhorn's redistribution approach. We highlight strengths and weaknesses, and formulate 5 recommendations for the Good Council,to fully exploit its potential.

Our main conclusion in advance:The distribution via the Citizens' Council is innovative and well thought out, but seems to us to be too focused on Austria. With a Global and impact-oriented focus, the redistribution could achieve even more.

Consistent altruism

Regardless of how one feels about wealth distribution in general (and we see it - especially with a global view - as critical): The fact that Marlene Engelhorn voluntarily gives away at least 90% of her wealth for the common good is a great thing. She not only gives a lot in absolute terms, but also in relation to her wealth. This is impressive and consistent, and we wish that many wealthy people would follow her example.

Publicly effective and democratic

Marlene Engelhorn does not want to decide on the distribution of her donation herself, but has delegated the decision to a citizens' council that she initiated specifically for this purpose.

10,000 people were randomly selected from Austria's Central Register of Residents and invited to participate. Out of 1.295 applications, 50 people were finally selected for the Council so that they represent the Austrian population as well as possible (e.g. by gender, origin and income). These 50 people will now come together on six weekends in Salzburg between March and June 2024. Supported by moderators and experts, they will develop "ideas for dealing with the distribution of wealth" and decide "what should happen with the 25 million euros so that these ideas can be implemented."

"Why so complicated?" asks Armin Wolf in the ZIB 2-interview with Engelhorn. Couldn't she just donate the money herself?

From our point of view - but also partly according to Engelhorn's own statements - the vehicle of the Citizens' Council stands out in two respects.

Publicity for structural solutions

Marlene Engelhorn has made a valuable contribution to the German-language debate on wealth distribution and taxation by going public with her inheritance in an offensive and clever way - and thus exposing herself as a high-net-worth individual in an unusual way.

Redistribution via the Citizens' Assembly gives your initiative even greater publicity: it is innovative and interesting. It takes place over a longer period of time and is continuously covered by the media. This makes it even more suitable than a "normal" donation or a voluntary transfer to the tax office to fuel the public debate in the long term.

According to Engelhorn, this debate is necessary in order to find structural solutions - such as higher taxes on wealth. After all, her 25 million is only a small amount compared to the huge wealth gap. According to the latest estimates this amounts to around 15 billion euros a year in Austria.

To this end, she also contributes as co-founder of the taxmenow association and through her involvement in the international tax initiatives Millionaires for Humanity and Patriotic Millionaires with.

Democratic legitimization through group intelligence

Marlene Engelhorn also problematizes the fact that her wealth puts her in an unfair position of power, even when it comes to donating. Through the Citizens' Council, she not only gives up her assets, but also the power to make decisions about them in advance. The distribution decision is democratically legitimized.

The diverse perspectives of the council members allow individual blind spots and vested interests to be balanced out, resulting - it is hoped - in a better outcome.

As a living example of participatory democratic procedures, the council also contributes to strengthening democratic discourse beyond Engelhorn's initiative. In view of the pressureliberal democracies are under in many places.

Not thinking globally enough?

The fortune of the Engelhorn industrialist family is primarily due to the pharmaceutical company Boehringer Mannheim , which has been in the family since the late 19th century. In 1997, it was finally sold for 11 billion dollars to the rival Roche tax-free for 11 billion dollars thanks to company headquarters in Bermuda. Marlene Engelhorn's inheritance now comes from her grandmother, Traudl Engelhorn-Vechiatto, whose fortune was valued at $4.2 billion before her death in 2022. valued was.

The inheritance remained untaxed because Austria has not had an inheritance tax since 2008. However, the fact that the assets were originally held by a German, but ultimately globally active group, calls this into question: Is the reference to Austria in the redistribution - both in terms of the distribution-decision as well as the distribution-result - really justified?

An Austrian decision

50 people from Austria discuss and decide against the background of the unequal distribution and low taxation of wealth in Austria about the use of Marlene Engelhorn's internationally generated 25 million. Why actually? Why not people from Germany, Canada or Bangladesh?

The question is all the more pertinent as income and wealth inequality is even more dramatic worldwide than it is in Austria. Even if there are undoubtedly many problems and difficult fates in Austria, the hardship in other countries is incomparably greater. Even those who receive unemployment benefits in Austria (2022 average 29.04 euros per day), thus have an income four times (!) higher income than the global median.

Globally much less privileged people are not represented in the Council.

We are aware that the organization of a global citizens' council would have been much more difficult and cumbersome in practice than that of the Good Council certainly already was. And the better should not be the enemy of the good.

It is even conceivable that a global council without a focus on a specific national debate would have had less, not more, publicity for structural solutions.

Focus on Austrian donation projects?

Nevertheless, we are concerned that the lack of voices from outside Austria in the Good Council, could have a negative impact on the quality of the distribution result.

In our view, this would be particularly the case if the Council were to focus on its role as a redistributor within Austria . This would be the case if the Council were to focus on projects in or from Austria, even though there are international alternatives where the same amount of money could do much more good.

We therefore see the challenge for the Good Council, in taking a step back and adopting a holistic perspective on the world's problems. It should see itself as a global citizens' council.

The Guidelines of the Council allow this: it "can allocate the money to organizations at home and abroad."

Philanthropy and democracy

Marlene Engelhorn again and again speaks critically on the subject of philanthropy and emphasizes that she would much rather see it heavily taxed. It is not a structural solution for societies to be dependent on the goodwill of individual wealthy individuals. The concentration of power in the hands of the super-rich undermines democracy. And philanthropy is often just a cover for tax avoidance.

With all these points, Engelhorn raises important issues, and we at Effektiv Spenden feel reminded of our interview with the Dutch historian Rutger Bregman. When asked about his viral call for higher taxation of high net worth individuals from the 2019 World Economic Forum and his take on philanthropy, he says: "Most billionaire philanthropy is bullshit. Most billionaires spend their philanthropy on silly art museums or they donate [...][to] a university that is already incredibly rich. This is the kind of philanthropy that is also often used to distract from their corrupt business models or to evade taxes."

It is important to note, however, that negative examples of philanthropy (e.g., greenwashing or self-serving political influence) do not mean that philanthropy in general has no place. Again, in the words of Rutger Bregman: "But that doesn't mean I'm against giving and philanthropy in general.[...] Of course, the first thing you have to do is pay taxes. That's where it starts. But after that, rich people still have a lot of money, and they don't have to spend it all on themselves.

What's more, philanthropy is not just about voluntarily doing more after paying your fair share of taxes. Principled and impact-oriented philanthropy can play an important Supplement be the basis for state action.

As Prof. William MacAskill also explained in an interview with Effektiv Spenden- Managing Director Anne Schulze: It is precisely the most important global problems that are often structurally underfunded. This is because national governments are primarily responsible for representing the interests of their own populations, and taxpayers' money is spent accordingly. Vulnerable groups, such as the world's poorest people, animals, and future generations, are systematically neglected.

Added to this is the inherent inertia of many state systems, as a result of which many years often pass between the emergence of new challenges and the anchoring of solutions in state operations. Philanthropically financed non-governmental organizations (NGOs) can play an accelerating role here by providing impetus. (We explain the importance of this function of philanthropy in the context of the defense and further development of democracy in a separate article.)

In an ideal political system, where tax revenues are used impartially and agilely according to well-balanced global priorities, there may be no need for philanthropy. In our imperfect system, it is needed. In our imperfect system, one euro donated to an excellent NGO working on an important and neglected problem can often have a much greater impact than an extra euro donated to the Ministry of Finance.

What smart philanthropy could achieve if the world's richest 1% gave 10%, our partner organization Longview Philanthropy impressively summarized.

Comparative cost-effectiveness analyses

The Citizens' Council has not yet decided on the distribution and we are therefore not yet able to assess Marlene Engelhorn's redistribution approach in terms of actual impact .

One thing is clear: the stakes are high. 25 million euros can make a big difference. But how much good it ultimately does depends heavily on how the money is spent.

Research showsthat charities differ significantly more in their effectiveness than is generally assumed. We at Effektiv Spenden we believethat the best donation projects achieve up to 100 times more than average initiatives.

While the well-being of all people is equally important, not all problems are equally big or equally solvable. It is wiser to work on a problem that affects a large number of people and is relatively easy (and therefore cheap) to solve than to focus on a problem that affects only a few people and is difficult (and therefore expensive) to solve.

Regardless of the issue an organization is working on, there are serious differences in how well the organization's solutions work and how well they are implemented.

Conventional selection criteria such as the presence of a donation seal, the relationship between administrative and project costs or simply the size and popularity of the organization are unfortunately not very useful. Neither is reliance on an efficient donation market.

In our view, the most important factor is the impact of a charitable project in relation to its cost (cost-effectiveness). The more good a project does per euro donated, the more people or animals it helps, the better. Thanks to a number of methodological innovations in recent decades, it is now possible to estimate the cost-effectiveness of organizations to a certain extent through scientific studies and analyses, and to compare organizations roughly.

The world leader in such comparative cost-effectiveness analyses is our US partner organization GiveWell. Each year, the research institute invests more than 50,000 man-hours in identifying the world's best charities. This research is the basis for Effektiv Spenden 's giving giving recommendation in the area of Fighting poverty.

GiveWell estimates that, statistically speaking, just 5,000 euros can save the life of a child. This is an astonishing figure when you consider that the EU average is over 3 million euros to prevent one additional death on railroads.

Such calculations can easily be revised upwards or downwards. But that doesn't change the fact that the differences are enormous.

Such large differences in cost-effectiveness are not limited to development cooperation. They can also be found in other areas such as mitigating climate change, improving animal welfare, defending democracy, and safeguarding the future.

What 25 million can achieve

For Marlene Engelhorn's redistribution, this means that - if implemented with maximum impact - it can achieve truly amazing things, even beyond its great public impact.

Serious cost-effectiveness analyses are only ever possible retrospectively. However, based roughly on figures from the past, EUR 25 million could achieve one of the following objectives:

  • Approx. 5,000 infants from dying from malaria or similarly preventable causes of death can be saved,
  • The household income of over 27,000 families of 5 living in extreme poverty for one year can be doubled,
  • Emission savings of more than 25 million tons of CO2 can be achieved,
  • 10 million chickens a life without torturous cage farming can be enabled or
  • The global philanthropic budget for the prevention of nuclear conflict for one year can be almost doubled.

5 recommendations to the Good Council

Despite all the criticism, we wish the Good Council, for his remaining consultations and would like to conclude by giving him the following food for thought.

  1. Think globally: Redistribution can achieve much more if it addresses the world's biggest problems and supports leading international organizations. The applies in particular to the fight against poverty, but also beyond that.
  1. Prioritize problems: The impact of a donation depends heavily on the cause area. Focus on large but neglected problems that have proven solutions. Take the interests of animals and future generations into account. We consider the following to be particularly important: flighting extreme poverty, mitigating climate change and improving animal welfare, defending democracy and safeguarding the future.
  1. Follow scientific research and analysis: Don't worry about donation seals or administrative costs, but rely on impact evaluations by independent experts. Use expert advice.
  1. Rely on specialized organizations: Charities that implement one or a few interventions very efficiently are usually a better choice than large non-profits that run many very different projects.
  1. Do not overburden organizations: Pay attention to whether an organization can actually process extensive additional funds well.

We at Effektiv Spenden are always happy to provide our expertise to all interested parties without obligation. As non-profit and donation-financed organization, our advice is free of charge and independent.

(Image source: Screenshot which is based on YouTube published press conference on the Good Council, from January 9, 2024 retrieved on May 3, 2024)

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