SYDNEY and KUALA LUMPUR, Jan 7 2020 (IPS) – The latest
November 2019 UBS/PwC Billionaires Report counted 2,101 billionaires
globally, or 589 more than five years before. Earlier, Farhad Manjoo had seriously recommended, ‘Abolish
Billionaires’, presenting a moral case against the super-rich as they have and
get far, far more than what they might reasonably claim to deserve.
Manjoo also argues that unless billionaires’ economic and
political power is cut, and their legitimacy cast in doubt, they will continue
to abuse power to further augment their fortunes and influence, in ways
detrimental to the economic, social and public good.
of billionaires, Josef Stadler, head of ultra-high net worth at
UBS Global Wealth Management, argued that their wealth “has also translated
into their philanthropy, as billionaires seek new ways to engineer far-reaching
environmental and social change.”
Philanthropic ethics expert Chiara Cordelli notes that philanthropy and donations have
diverted social responsibility from governments, and created other problems by
bypassing democratic political processes and accountability. “The
philanthropist should not get to decide – in virtue of her or his
disproportionate influence – which world we should live in”.
An ostensibly benign ‘billionaire effect’ cannot offset the
adverse impacts of billionaires’ wealth accumulation, tax avoidance and abuse
of power to corrupt political processes and policy making. Rather, ‘every billionaire
should be regarded as a policy failure’. To create fairer societies, we
need to end extreme wealth concentration and its problematic consequences.
Dubious sources Robert
Reich has shown that a significant share of billionaires’ wealth is
undeserved and does not bear any reasonable connection to their ability,
intelligence or contribution, as expected in a society supposedly based on
meritocracy and fair competition.
Oxfam estimates that about a third of billionaire wealth is inherited. There is no real
economic case for inherited wealth as it undermines social mobility, economic
progress and meritocracy, the main basis of legitimation in modern society.
Other work finds that about 43 per cent of billionaire
wealth comes from crony connections to governments and monopolies, e.g., when
billionaires use such connections and corruption to secure government
concessions and contracts.
In developing countries, this share was even higher, 56 per cent, according to a 2015 Oxfam study. The Economist’s
capitalism index also suggests that corruption and crony connections to
governments are behind much billionaire wealth.
Another source of billionaire wealth is abuse of monopoly
privileges granted by patent laws. While intellectual property has been
justified as necessary for innovation, recent research, summarized by the The Economist, disputes the supposed link between patent
rights and innovation, and deems the patent system a dysfunctional way to
reward innovation or new ideas.
Since the 1980s, patent rights have been extended well
beyond what may be considered necessary to incentivize innovation. For Richard
Posner, a respected US judge, “such extensions offer almost no incentive
for creating additional intellectual property”.
Insider trading – taking advantage of privileged information
not yet made public – has been significantly abused for ‘unfair’ advantage in
markets. The New York Times has found, “Some of the most prominent
cases of illegal insider dealings have involved very wealthy people”.
Such TNCs, cartels, other monopolies and oligopolies extract
lucrative rents, enabling them to secure super-profits, accelerating wealth
accumulation and concentration at the expense of petty producers, workers and
The way wealth is used by the super-rich confirms their own
‘social disutility’. They accumulate more quickly by paying as little tax as
possible, making good use of tax advisers and havens. A study found that the
super-rich pay as much as 30% less tax than they should, denying governments
billions in lost tax revenue.
The extremely wealthy also get the best investment and tax
evasion advice, enabling billionaire wealth to increase by an average of 11% annually since 2009, far more than
average investors and ordinary savers get.
‘Dark money’ corrupts
secretive Society of Trust and Estate Practitioners (STEP), representing over
20,000 wealth managers, has successfully lobbied many governments to reduce
taxes on the richest. STEP has spent billions to ‘buy’ legal impunity,
politicians and the media to lower taxes on its clientele. Such lobbying has
accelerated wealth concentration and accumulation.
Such ‘dark’ money is used to influence elections and public
policy the world over. An Oxfam study has shown how politicians have been ‘bought’ by Latin
America’s super-rich, e.g., with substantial financial backing for ethno-populist, racist and religiously
recent decades, neoliberal economists have taken a much more
benign view of oligopolies and monopolies, distinguishing them from classical
liberal economists committed to market competition.
Conversely, insisting on competition in small developing
economies has effectively prevented domestic firms from becoming
internationally competitive by building on economies of scale and scope.
Significantly, even the International Monetary Fund, which
imposed neoliberal policies for nearly four decades as a condition for credit
support, now accepts that neoliberalism was “oversold”, while the World Bank acknowledges disappointing growth after
Deregulation, liberalization, privatization and
globalization have strengthened the market power of corporations, reduced the
progressivity of tax systems, reduced public provisioning, increased the frequency
and intensity of financial crises, and slowed growth and development.
Chowdhury, a former professor of economics at the University of Western
Sydney, held senior United Nations positions during 2008–2015 in New York and
Bangkok.**Jomo Kwame Sundaram, a
former economics professor, was United Nations Assistant Secretary-General for
Economic Development, and received the Wassily Leontief Prize for Advancing the
Frontiers of Economic Thought in 2007.