(Interviewed by Louis James, Editor, International Speculator)

This interview was first published on November 4, 2009

Editor’s Note: As the holiday season approaches, you may be planning to make a donation to charity. Before you do, read Casey Research founder Doug Casey’s take on why giving away wealth is usually a bad idea…

Louis James: Doug, our readers are hoping to live well for the rest of their lives. If they are successful, they’ll have some money left over at the end. Some have wondered, given your low opinion of trying to use the state to improve the human condition, if there’s a private charity you think might be a good place to direct funds when they’ll no longer be needing them?

Doug: No.

L: That’s it? No?

Doug: Most charities aren’t worth the cost of the gunpowder it would take to blow them to hell.

L: And the permitting for the demolition, fuhgeddaboudit. But can you explain why?

Doug: Sure. Charities are largely counterproductive. Their main beneficiaries are not the intended recipients but the givers. They get some tax benefits, but, mainly, they get the holy high of do-goodism. Frankly, the idea of charity itself is corrupting to both parties in the transaction.

For instance, take Bill Gates and Warren Buffett. Both are geniuses at their businesses. But they’re the type of geniuses I consider to be idiot savants. If they really wanted to improve the state of the world, they should continue doing what they do best, which is accumulating wealth. Or, actually, creating it, as opposed to dissipating it by giving it away. Giving money away breaks up a capital pool that could have been used productively by those who build it for making new wealth (which increases the amount of wealth that exists in the world).

Worse, giving money away usually delivers it into the hands of people who don’t deserve it. That sends the wrong moral message. People should have, or get, things because they deserve them. And you deserve things because you earn them. In other words, wealth should be a consequence of doing things that improve the state of the world. Endowing groups, or individuals, because they happen to have had some bad luck, or are perpetual losers, is actually immoral.

When money is given away, it’s almost as bad as government welfare. It makes it unnecessary for the recipient to produce, and that tends to cement him to his current station in life. The very act of making an urgent situation non-urgent takes away the incentive, the urgency, to improve.

Morally speaking, charity is not a virtue, it’s a vice.

L: The giver gets to feel good at the expense of the people whose independent drive they undermine. But what about the programs that are specifically designed to teach an individual to fish, rather than to just hand out fish – those that teach job skills, for example – do you see them the same way?

Doug: I’m not saying that programs like that can have no positive effect. There are people who genuinely want to improve themselves, but, for whatever reason, just can’t manage it on their own. But charity is not the best way to approach the issue.

Look, the basic point I’m making is that the best way to reduce the amount of poverty in the world is to create more wealth – as much as possible, as quickly as possible.

The essence of a charity transaction is to transfer wealth from those who have shown they can create it to those who have not shown they can. I mean, if a man doesn’t know how to “fish,” which isn’t exactly rocket science, after all, you have to wonder why; something we discussed in our chat about education. Money is best left in the hands of the most competent and productive people, and the best way to tell who’s the most competent and productive is generally to look at who’s created the most wealth.

L: And the more wealth there is in the world, the better off everyone is, even those who end up working for the creators.

Doug: Right. And those employees are creating and earning their own wealth as well. It sure has a lot more dignity than being a welfare bum. Besides, if they are competent and creative, there’s no reason for them not to rise to the top.

L: And as we discussed in our conversation on technology, you need large pools of capital to develop new technologies – and new technologies tend, on average, to improve the lot of the little guy proportionally more than the guy at the top of the social pyramid.

Doug: Yes. Charity exists, mostly, to make the donor feel good. It assuages guilt people accrue over a lifetime, for real or imaginary reasons.

L: I remember that interview John Stossel did with Ted Turner, in which he asked him to explain why he gave a billion dollars to the UN. Turner looked pole-axed for a minute, then got up and walked out of the interview.

Doug: [Laughs] That’s a polar opposite to charity. That was giving money to an organization that is itself destructive. Counterproductive in the extreme. The UN, which is just a corrupt club for governments, should be abolished, not subsidized. And here’s this fool actually feeding the beast.

It’s a perfect example of what most so-called charitable giving is about. It’s an excuse for people to display their fine philanthropist plumage. It’s a never-ending contest of one-upmanship, to see who can be the king of the hill of fools for a day, by giving the most. In most cases, it’s not about what the money is going to, it’s about being a big shot among peers and getting invited to all the most fashionable parties. They get to socialize with celebrities and others who, in our corrupt society, buy fame by giving away money, which in many cases was either easily earned or unearned.

In most cases, philanthropy doesn’t arise from a love for one’s fellow man, but from a need to assuage guilt, a need to show off, and a lack of imagination.

L: So, your basic argument is that it’s better (and cheaper) to put a fence at the top of a cliff than to put an ambulance at the bottom. That is, rather than putting Band-Aids on the poverty-stricken, it’s better not to have any poverty-stricken. Therefore, it’s better to allow wealth to continue accumulating and creating more wealth. And that means that any effort to take wealth away from the wealthy, the productive, and give it to the non-productive, is…counterproductive.

Doug: That’s basically the argument. Yes. And it’s true for both practical and ethical reasons.

Doug Casey is a multimillionaire speculator and the founder of Casey Research. He literally wrote the book on profiting during economic turmoil. Doug’s book, Crisis Investing, spent multiple weeks as number one on the New York Times bestsellers list and was the best-selling financial book of 1980. Doug has been a regular guest on national television, including spots on CNN, Merv Griffin, Charlie Rose, Regis Philbin, Phil Donahue, and NBC News.

Doug and his team of analysts write The Casey Report, one of the world’s most respected investment advisories. Each month, The Casey Report provides specific, actionable ideas to help subscribers make money in stocks, bonds, currencies, real estate, and commodities. You can try out The Casey Report risk-free by clicking here.