Karl Marx once said a capitalist is a rational miser. Perhaps few fit that bill better than 19th century American financier George Peabody.

Born a poor orphan in Massachusetts with little education, Peabody worked his way up in the British-American financial world to become the country’s leading banker. He amassed a stunning personal fortune and financed everything from the silk trade with China to iron rail exports. By the time he retired, Peabody was one of the richest men in the United States and helped lay the foundation of the great House of Morgan.

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Despite his fabulous fortune, the man was scarred for life by his early poverty and suffered from a great sense of insecurity. He hoarded money in perpetual preparation for crisis. His stinginess was staggering. The old man would seldom dine out. He went to his London office with a small lunchbox every day. The only indulgence Peabody allowed himself was to spend one pence and a halfpenny on an apple after his meal.

Junius Spencer Morgan – his junior partner – often recalled how on one gloomy winter morning in 1854, he found Peabody arriving at the London office shivering and looking sick. The miserly banker did not have his own carriage and had come to work by a public horsecar. At Morgan’s insistence, Peabody agreed to return home. Some time later, Morgan found Peabody standing in the rain at the station. “Mr Peabody,” he said, “I thought you were going home.”

“I am,” Peabody replied, “but there’s only been a two-penny bus that has come along as yet. I’m waiting for the penny one. By then, the old man had amassed a personal fortune of US$20 million.

This often-told tale has come to epitomise his stinginess. But this is only half of the story. When Peabody finally retired, the lonely bachelor, who had a few illegitimate children whom he excluded from his will, suddenly transformed into the world’s biggest philanthropist.

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His generosity was as staggering as his earlier thriftiness. Peabody freely spent money on sponsoring arts, education and public services. He endowed a natural history museum at Yale University, an archaeology museum at Harvard and set up an education fund for emancipated southern blacks. He provided houses for the poor in Britain. These Peabody Estates still dot London today. Queen Victoria tried to honour him with a knighthood, but Peabody declined.

When he died in 1869 at 74, the British government prepared a grave for him in Westminster Abbey to honour the “father of modern philanthropy”. But in his will, Peabody insisted his remains be returned to the US.

Peabody embodies what Charles Dickens called telescopic philanthropy – unreserved love for abstract humanity but extreme stinginess to those he knew. He was the prototype of many American tycoons in the generations that followed. Today, Bill Gates and Warren Buffett are more humane and less extreme, but they are largely made in the same mould as Peabody. Both are famous for their frugality and simple taste. Buffett – perhaps the world’s greatest investor – regularly eats at McDonald’s and resides in a house bought in 1958 for US$31,500. Gates is also known for his disdain for luxury. But they are free-handed when it comes to donation. As of last year, Buffett had made lifetime donations of US$21.5 billion while Gates gave US$27 billion. The money went to help poverty relief programmes around the world.

In June 2010, the two started the Giving Pledge campaign to encourage wealthy individuals around the world to donate for philanthropic causes. By March 2016, 142 rich individuals had signed up and most were American. Together, they donated US$365 billion.

China’s wealthy class has lagged behind in this regard. Today China boasts more billionaires than the US, but its charity giving is just a fraction of the latter’s.

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Many blame the callousness of rich Chinese. Some even suggest “giving” is just not in Chinese culture. This is far from the truth. China has a long-established tradition of giving. In ancient China, most of the so-called public facilities – schools, nurseries, bridges and ferries – were run by the local gentry and merchant class as charitable operations. To a large extent, the reluctance of today’s wealthy Chinese to give to charity is rooted in the system. Under a political system where getting rich only became glorious 30 years ago, many take care not to show their wealth. The nouveau riche may get media attention, but the majority of the rich are cautious and low-profile.

Even for those who are willing to donate, the country’s charity sector is still in its infancy. It lacks credible, established charity institutes. Until this week, it did not even have a charity law.

The law – after 10 years of deliberation – finally took effect on Thursday.

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At the same time, charity donations in China have also begun to increase. Total donations in 2014 reached 104.2 billion yuan (HK$121 billion), up 23 per cent from 2011. Hopefully in the not-too-distant future, the number of Chinese philanthropists can catch up with the Americans.

Chow Chung-yan is executive editor of the South China Morning Post, overseeing daily print and digital operations