The idea that billionaires ‘deserve’ their vast fortunes is a ridiculous and destructive myth.
Everyone has it tough during the COVID-19 pandemic, and we are all in the same boat – this has been a common refrain throughout the crisis.
It is true that we are all on board the Titanic together. However, some are riding first class, some are riding third class, and others are in the galley below rowing… Oh, and there are not enough lifeboats to go round.
In reality, the super-rich are not only shielded from this crisis by their wealth, which enables them to shelter from the virus on superyachts or escape it on private jets, some are even enjoying an unprecedented bounty during these difficult times. This is especially the case in the United States.
During the coronavirus crisis, US billionaires accrued a huge windfall of more than $434bn in the two months between mid-March and mid-May, according to a new report by the progressive Washington-based Institute for Policy Studies and Americans for Tax Fairness.
This comes at a time when at least 40 million Americans are out of work, struggling to get by, and 265 million people around the world are at risk of dying of hunger.
While front-line workers risk their health and lives to keep society functioning and care for the sick, the biggest financial winner by far is the world’s richest man, Jeff Bezos, who has seen his fortune expand by nearly $35bn thanks to the surge in the value of his company Amazon, as people trapped in lockdown have turned to online shopping.
Whenever anyone, including myself, criticises the obscene wealth of billionaires, there are those who rush in to defend them, arguing that critics are just envious and that billionaires deserve this success and earned their vast fortunes.
But is this actually the case?
Like a superhero origin myth, there is a typical narrative that surrounds billionaires, especially those in the tech industry. It goes something like this: X, working in their bedroom/garage/dorm, came up with a brilliant idea, against the odds, brought it to market and is now enjoying the fruits of their brilliance.
It is true that quite a few billionaires started off with nothing (or at least with a far more modest fortune), and many did exhibit inspiring brilliance in their early careers. However, is the acumen of these entrepreneurs really worth so much more than everyone else’s labour – combined?
Unimaginably, it would take an American household earning the mean $60,000 a year nearly 2.5 million years to accumulate the estimated $147bn which Jeff Bezos is estimated to be worth… if they did not spend a penny. A low-paid Amazon worker on the shopfloor would take more than 4 million years of saving their entire income to assemble their boss’s fortune.
And these are workers in the world’s richest country. Now try to imagine how long it would take a poor worker in South Asia or sub-Saharan Africa to make this kind of money.
It goes without saying that nobody’s ideas or work ethic or vision are worth thousands or even millions of years of everyone else’s labour. This notion is particularly insulting in this time of crisis, when the people society depends on to function are not tycoons, top CEOs or hedge fund managers but nurses, doctors, emergency workers, care-givers, supermarket staff, delivery people and utility workers.
Moreover, there is almost inevitably an ugly and underexposed underbelly which casts serious doubt on the idea that billionaires “earned” their unfathomable fortunes. While there are certainly “good billionaires” and “bad billionaires”, there are no billionaires, as far as I can ascertain, who made their billions fair and square, without employing ethically dubious practices.
These practices may include underpaying or overworking staff, monopolising the productivity gains delivered by their workers, exporting jobs, stifling competition, and even exercising monopolies or near-monopolies.
One area where the billionaire class and large corporations have been laughing all the way to the bank, and where the rest of society has been crying in misery, is taxation. While ordinary wage earners in advanced economies, especially those with a robust social safety net, disproportionately bear the burden of taxation, corporate tax rates and taxes on high incomes and capital have hit historic lows, with a de facto regressive tax system increasingly becoming the new normal.
The results of this skewed, unjust system are clear to see. The fattest cats in America, for example, saw their wealth bloat by over 1,100 percent between 1990 and 2018, according to the Institute for Policy Studies report, yet their proportional tax obligations decreased a spectacular 79 percent over the same timescale.
Over and above this, the unprecedented mobility of capital and wealthy individuals, facilitated by decades of deregulation and the absence of a global tax regimen or coordination of tax policies, has enabled many corporations and billionaires to transfer their profits to tax paradises, allowing them to dodge their tax burdens and, with them, their social responsibilities. This has also forced a race to the bottom between countries fearful of losing out to tax havens.
Even though corporate tax rates are at an all-time low, the IMF estimates that governments are deprived of up to $600bn a year in corporate taxes due to the kind of clever bookkeeping that has been made possible through decades of financial deregulation and walks the fine line between legal “tax avoidance” and illegal “tax evasion”. Economists calculate that 40 percent of the profits of multinationals are artificially transferred to tax havens from higher-tax countries, especially in Europe.
To add insult to injury, not only has deregulation devastated the welfare state, but also among the biggest recipients of state welfare are, paradoxically, the richest, who benefit the most from the rescue packages designed to pull us out of crises, especially in the US. This occurred during the Great Recession following the financial meltdown of 2008-2009 and is happening again during the current coronavirus crisis.
More enlightened billionaires have arrived at the realisation that such vast concentrations of wealth are not only bad news for society; they are bad for the wealthy. Warren Buffett and Bill Gates are both advocates of higher taxes on the rich, but the rates they consider fair are nowhere near enough to bridge the inequality chasm that has emerged, rebuild our tattered social safety nets, lift the world’s poorest out of poverty and heal the environmental devastation caused by such extremes of wealth.
Another solution is for billionaires to voluntarily divest. Buffet and Gates have not only pledged to give away their money, they have established the so-called Giving Pledge, where they encourage other tycoons to also part with their fortunes. However, the response to the initiative among the mega-rich, or what I like to think of as wealth extremists, has been lacklustre at best, representing a tiny drop in the ocean compared with the total wealth billionaires control. Meanwhile, those who have signed up to the pledge are generally seeing their fortunes grow far faster than they are giving them away.
Besides, philanthropy is no substitute for taxation and social justice. It puts what should be a collective decision-making process on societal priorities in the hands of unelected individuals, who may or may not be concerned about the greater good.
Moreover, this gigantic concentration of wealth gives billionaires the kind of political clout that makes a mockery of the one person, one vote foundation of democracy. We are used to the business class representing a powerful oligarchy in authoritarian and autocratic regimes, such as in Russia or the Arab world. In democracies, the massive lobbying power, both direct and indirect, of the billionaires and corporations erodes democratic governance and undermines the will of the electorate.
What we need are not half-baked efforts to make being a billionaire undesirable – we must make becoming a billionaire impossible. This requires a collective, global effort to introduce “equanomics”.
This can be achieved through a variety of mechanisms, from a coordinated taxation system so progressive that there remains no incentive or possibility to build up such vast fortunes, to enacting an actual cap on wealth and incomes.
This will both narrow inequalities and enable societies around the world to repair and expand their social safety nets, as well as to better reward those working in neglected vital sectors. Moreover, it will enhance the incentive for constructive, socially beneficial innovation because people will feel that the fruits of their labour are not just going to make fat cats fatter.