THE FOUNDATIONS AS AN ALTERNATIVE TO GOVERNMENT EXPENDITURE

But, on the other hand, the great advantage of this type of foundations and associations is that of allowing to introduce the economic force of freedom (and with it competition) between the different foundations and associations. If the State is the only one that practices this type of services, the creative power of free competition disappears in the attainment of these objectives. 

Although the Government is the only holder of employment of tax coercion, that does not mean that it nourishes reserving the exclusive right of rendering certain collective services to the State. If the political road becomes the exclusive channel of expression for corresponding preferences, the opinion of minority groups will be excluded. If the satisfaction of each new tendency or desire depended on majority and general approval, it would be hard for them to end up being materialized because, in the beginning, there are few innovative performances. 

In this respect it is important to remember that, a long time before the governments decided to intervene in connection with these matters, a great part of the collective necessities, today generally felt as such, have been satisfied through the personal effort of individuals or small groupings of citizens that contributed the demanded means for the materialization of the achievement of a series of collective purposes which they estimated as important. The teaching centres, hospitals, libraries, museums, theatres and parks were not services that the State facilitated initially (…), in their initial development certain private benefactors were pioneers» (HAYEK, 1976). 

There are great advantages, with regard to the collective rendering of services for the state apparatus that agglutinates in its breast the economic power of freedom, pluralism, solidarity – even with the minorities – and competition that motivates initiative and creativity. 

With the foundations, the healthy private interest of doing what I want with my own things can be channelled in a more plural, efficient and democratic way. Instead of paying taxes that only the State projects and plans to spend, we would have an open means to free economic decision-making that each citizen would channel according to his own preferences. The greatest number of people possible would have the greatest number of possibilities so that they themselves could choose their own way of life. 

There would be a continuous exercise of right to the economic vote respecting the minorities that, although in inferior conditions, would have an open road to the carrying out of their projects and collective realizations by means of liberality. 

The options of each group of individuals allow them to choose their own lifestyle, provided that they do not hinder the freedom of other individuals. 

These associations and foundations, because of their necessary dedication to their corporate purposes, would allow to receive those individuals’ contributions that value them in their authentic and subjective measure enlarging the field of exercise of freedom. 

Private and managerial contributions and grants to this type of non-profit-making associations and foundations allow to reintroduce competition mechanisms on a production level, and therefore, to guarantee the growth of more diversified and better quality services. It also allows to restore a logical pressure for a permanent fall in costs. 

The development of the foundations with diverse purposes, from assistance, educational or scientific activities to ecological, cultural, folkloric, political or sporting activities, allows to open up the fan of free options in society, strengthening the right to carry out, with my own possessions, what I consider more opportune. A society that organizes its producer and creator activity through foundations is a more genuinely free and plural society in which there are more possibilities for my personal options to be made reality. 

Organizing the production of goods and services through foundations and associations of this type does not imply that competition is eliminated. Competition is not necessarily tied to individual profit-making desire and monetary benefit. Without profit-making desire a competitive process is equally established between foundations, based on improving the quality of fulfilment of their statutory goals that will be the reason for their survival and development. The administration of such organizations will be continually subjected to the positive competition of getting the best service for the potential beneficiaries and, in definitive, to society. The concept of benefit will suffer an equally positive transformation passing from a merely monetary and short-term conception towards a more stable, durable interpretation, which reflects human values, hard to measure in quantitative terms. 

The process of competition is fundamentally a process of individual discovery and speedy transmission of information throughout the whole social meshing. «The problem consists precisely of discovering how the use of information can be optimised, as well as the capacities and opportunities for people to obtain new information that is distributed among hundreds of thousands of individuals and that nobody can, for this reason, personally possess in its entirety» (HAYEK, 1976). 

Competition facilitates the acquisition of transfer of information and, as HAYEK indicates, it is absurd to imagine a priori that somebody can be in possession of the mentioned wealth of knowledge. 

Foundations are especially appropriate for the lending of collective goods and services that require the contribution of many taxpayers that coincide in the necessity of such services. From this perspective they become an alternative to the state public services with the advantage of respecting minority options more, avoiding monopolization and homogenisation of options and applying the principle of contributing in the direction that I personally think more convenient for social improvement. A society structured more around these associations and foundations becomes a more plural and democratic society. 

A diversified social offer of foundations could reduce the necessity of state public expenditure in such activities as education, scientific investigation, social and assistance works, health, attention to childhood, attention to pensioners, improvement of the environmental surroundings, etc. 

Such a social offer would allow tax rebates for contributions to such institutions improving the wealth of options to citizens and introducing a competitive approach among public activities. 

«The concession of favourable fiscal treatment to private foundations is established uniformly in the fiscal systems of the most important countries in the world, in a clear recognition of the functions parallel to those of public nature that, imperative of their very legal nature, they necessarily carry out.” (VILASECA I MARCET, Coord., 1984). 

The tendency towards the Welfare State of all the States and Public Corporations reinforces the advisability of extending the foundational objectives to strictly charitable ones to develop the characteristic purposes of the public authorities in a more effective way. 

In Spain, as we have indicated, the strengthening of non-profit-making associations has greater raison d’être because the very Constitution (article 34) expressly recognizes the right of individuals to found for purposes of general interest. The result is that many of the lower range current dispositions should unify the lexicon and general orientation, as well as suppress all real limitation to charitable purposes. 

Not only should the foundations not be taxed themselves, but also rather, logically, the contributions should be reduced evenly and not diminishing the sum reduced proportionally according to the total superior amount of the taxpayer’s income. The holders of high incomes are those that can really apply an important part of them to favour and strengthen the foundations. Nor does it seem appropriate to limit to a certain percent the percentage of the tax base that can be reduced. It should be possible for the surplus income of a person to be applied without limits to objectives of general interest just as the team of lawyers managed by JOSEP MARÍA VILASECA AND MARCET indicate for the Spanish case in their conclusions. 

The usefulness, justice would dare to say, of tax relief of contributions to these associations is reinforced by the fact that these contributions are economically and legally separated from the patrimonial mass of those who contribute them, to belong henceforth to the social object and statutory purpose of collective interest. 

The State or Public Corporation is liberated from the realization of these collective goods and services with the consequent possibility of reduction of its public expenditure. 

The necessity for reduction of such contributions is directly derived from the ownership of these patrimonies to social objects of general interest that substitute the collective purposes of the coercive tax to the taxpayer. 

The State can spend less because these associations carry out that which is agreed with more pluralism. 

The Crown Corporations would not usurp the classic principle of property and control of doing, with what is mine, what I consider most convenient. 

These associations cannot be taxed, since it would be as if the State were taxing itself in its activities, but rather also, taxes should be reduced on gratuitous donations because they contribute in a parallel way to the attainment of the same social purposes. 

The State should decide if this or that social purpose of this or that foundation are not really harmful for society in general and whether those social purposes are completely fulfilled by such an association, but, given these assumptions, it is obvious that fiscal treatment should be favourable. 

The promotion of associations of this type has to be on a par with a state control directed fundamentally towards confirmation that the contributed funds go towards the anticipated purpose. It is in these associations where rigorous audits should be demanded that do not conclude in the mere economic environment, but rather they examine entirely the execution of the social purposes. It is here where the demand for a social balance would be high-priority. It should be clear that the contributed funds, and those picked up in mercantile activities, are dedicated voted to statutory social purposes; otherwise social fraud would be incurred. 

CONCLUSION 

What we propose is strengthening an institution that on one hand would curb the interventionist, homogenising and planning attitude of the State and on the other would put a limit to the indiscriminate extension of the attitude of short-term speculative and selfish enrichment in which the lucrative capitalist company can degenerate. 

From social purposes, such as the development of domestic, artistic or union work to foundations where the social goal was the purchase of lands for forest repopulation or the investigation of the scientific solution of AIDS, all would fit in a freer and more humanized society, in which the State would stick to its vital function of legislatively coordinating and promoting the individual aspirations of its citizens. 

«As R.C.CORNUELLE has convincingly demonstrated, for the good functioning of society it is very important that a third independent sector develops its activity between the private sector and the public, capable of providing in a more effective way, many of those that today are considered services characteristic of the Government. Allowing to compete with this in the area of the public service grant, the existence of this independent sector would eliminate the most important threat that government intervention bears: the birth of the monopoly with all its unavoidable sequels of concentration of power and inefficacy. (…)Civic spirit does not have to always be channelled by the way of government decision” (HAYEK, 1976). 

The promotion of these institutions is undergoing a political and social will of collaboration between the State and private initiative where not only the positive image of these institutions is fomented, but the bureaucratic obstacles that demand a numberless of deliberations, agreements, conventions, are eliminated etc., that discourage the private sector. This requires, especially the managerial world, to act more rapidly and with more effectiveness in healthy social competition. 

JJ Franch Meneu
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