The world’s billionaires’ fortunes has now reached $10.2 trillion. That comes from a report by UBS, a Swiss bank which found that their wealth has increased by 27.5% during the height of the pandemic crisis from April to July 2020. This growth occurred while millions were losing jobs, income, health coverage, and were struggling to get by. I had previously written about the increase in the number of billionaires, this is far more revealing, the growth of their wealth as a result of the pandemic—not only because they were able to ride the storm created by the virus but also because they were able to gain from its downside. Jeff Bezos as most already know is a prime example. Why this is so important is so well expressed by Luke Hilyard, executive director of the High Pay Center a think tank that like its name focuses on undue and disproportionate pay: “…extreme wealth is an ugly phenomenon from a moral perspective, but it’s also economically and socially destructive.”
“Billionaire wealth equals to a fortune almost
impossible to spend over multiple lifetimes of absolute luxury. Anyone
accumulating riches on this scale could easily afford to raise the pay of the
employees who generate their wealth, or contribute a great deal more in
taxes to support vital public services,
while remaining very well rewarded for whatever successes they’ve achieved.”
“The findings from the UBS report showing that the
super-rich are getting even richer are a sign that capitalism isn’t working as
This is not without consequences. Josef Stradler the
head of the UBS office which deals with the world’s richest people, admits that
these facts could lead to public and political anger. He further admits that
the wealthy themselves are aware of it and in the past had warned that the
inequality between rich and poor could lead to what he called a “strike-back”.
He further explains that “We are at an inflection point. Wealth concentration
is as high as in 1905, this is something billionaires are concerned about. The problem
is the power of interest on interest- that makes big money bigger and, the
question is to what extent is that sustainable and at what point will society
intervene and strike back?” It’s a question many are already asking.
There are now 788 billionaires in the US, or at least there was in 2019 according to a study by Wealth-X which issues a comprehensive report yearly, that is 12% more than the year before. Collectively they control $ 3.4 trillion which is 14% more than they did in 2018. The US actually has more billionaires than any other country, more than the next 5 countries combined. China is second with less than half the US number. In 2016 the 620 billionaires in the US controlled $2.6 trillion. The growth among the mega rich which is partly due to the tech boom is now the subject of much discussion. It is becoming more and more inescapable that the US has economic policies which favor billionaires and end up placing workers at a disadvantage. Are the rich too rich, many are now beginning to ask? Given it is an election year it is assumed the question will be a continued topic. When considering how difficult it is for many workers to be paid a living wage, how many jobs are being lost to automation, how many are unemployed with no assurance they will be able to get their job back due to Covid-19, when several studies show the US trending towards being a plutocracy, how rich is too rich is not only an important topic it is a must.
Prompted by the protest, ideas for needed changes are
being talked about, written about and thought about. Here are three examples.
The NYT has been running a series called The America We Need. In that vein, a recent editorial by David Leonhardt addressed new research documenting the wage gap between blacks and whites since the gap is as large now as it was in the 50’s during segregation. Several ideas are being put forth by economists and others: Raising the pay for all working families, asking the wealthy to let go of legacy college admissions and favorable tax treatment, which among other things increase inequality, or even adopt profit sharing plans.
The Chamber of Commerce which has become a powerful conservative lobbying group, has published a report on the opportunities gap that hinders black Americans. It highlights that for blacks unemployment is twice that of whites. Blacks represent 12% of US workers but only 9% of business owners and have a much harder time obtaining financing. The Chamber has held events trying to find solutions.
Meanwhile the BBC carried a piece by Tara Westover where she calls attention to the changes needed to build a world where we can be one people, she talks about how Covid-19 has affected minorities disproportionately and asks us to rethink changes in education, so that we can end up in a world where class, education and profession do not divide us.
It’s hard to know what the results will be but it’s
encouraging that talk of changes is coming from many different sources.
A newsletter I receive had a small notice about an article in Fortune magazine which really caught my attention as I hope it will yours. The article which headline included that “America is moving towards a tax increase for the middle class”, was making a case for VAT, and in doing so shared some valuable if scary statistics—because a value added tax it claimed would raise more money than any other means. According to the CBO, Congressional Budget Office, federal spending will jump from $4.45 billion in 2019 to $7,375 billion in 2029. Although revenues are projected to grow, expenses are projected to outgrow the revenues collected from taxes. This means that the federal deficit which was $984 billion last year will grow to $2.156 trillion in 2029. The US would be borrowing 25 cents for every dollar it spends. The federal debt would rise to $29.6 trillion or 104% of national income when last year it was 79%. The gap between revenues and expenditures would be so wide that taxing the rich alone would not suffice. In this article the author claims only a VAT might help, a tax which would begin at the manufacturing level, make prices rise and be hard on most wage earners. It’s a tax some in Washington may be led to consider but it need not be the only solution.
The CBO’s numbers are sobering, distressing and
frightening, at a time when no presidential candidate is addressing the issues
they speak to and when another round of tax cut is possible. Yet we need not be experts to realize this
looming fiscal quagmire (the author’s words) needs to be at the very least acknowledged.
Policy makers’ silence and ignorance need not be ours.