Why can’t billionaires develop the common good the way they build wealth?

The May 20, 2020 cover of Forbes magazine features a photo of Larry Ellison, the billionaire founder of Oracle Corporation. On page 114 is the Billionaires Index, which includes six additional pages, in very small print. What becomes clear:

Almost every country has billionaires. Even Venezuela and Zimbabwe have one billionaire each.

The United States has the highest number of billionaires, about 624.

China has the second-highest number of billionaires, 390. Not bad for a communist country. In fact, the number of Chinese billionaires is even higher, as Hong Kong is listed separately with 66 billionaires, and independent Taiwan adds another 40 Chinese billionaires.

Germany has 110 billionaires, Russia has 102 billionaires, and then India has 94 billionaires.

Each of the other countries has less than 100 billionaires, many of them Australia, Canada, France, Switzerland.

There seem to be more billionaires who were not recognized by Forbes or who were not counted because their wealth could not be estimated. This includes members of the royal family, dictators, and criminals. The world has between 2,000 and 2,200 billionaires. The estimated total net wealth of the world’s billionaires is over $8 trillion.

Billionaires could become a good force – especially if their resources were used for the common good. This can happen in three ways:

  • Billionaires suddenly realize that the common good of the planet is an important goal for them, so they join forces to save humanity and nature.
  • Governments force billionaires to pay their “fair share” of taxes.
  • The public decides that billionaires should not exist and governments simply tax them accordingly.
  • Will billionaires agree to higher taxes? In the last US election, Bernie Sanders suggested that billionaires should be exempt from taxes, while Joe Biden warned against demonizing the rich.

There is a common myth that billionaires will always be there. The media worships billionaires. Such as Bill Gates and Warren Buffett, who point out that some billionaires may work on projects beyond their own interests.

Where do billionaires come from?

We should start by asking, where do billionaires come from? Do they simply grow out of the fertile digital soil of Silicon Valley? Can anyone – with enough hard work – become a billionaire?

So how does one become a billionaire? Robert Reich, former US Secretary of Labor, explains the four sources of wealth:

Inherited wealth: about 60 percent of the wealth in the US is inherited. The best chance of becoming a billionaire is to marry or be born into intergenerational wealth.

  • Monopolies: Jeff Bezos’ Amazon accounts for nearly 50 percent of all e-commerce retail sales in America. Patent and trademark regimes that have been extended for years to come create the potential for billionaires like George Lucas and Oprah Winfrey.
  • Insider trading: hedge fund billionaire Steven A. Cohen has made “hundreds of millions of dollars in illegal profits ” – thanks to his insider trading expertise. This is not an isolated case.
  • Politics: you can invest in politicians – and even bet on them like racehorses – through campaign contributions. Americans for Tax Fairness estimates that Charles Koch and David Koch and/or Koch

Industries could save between $1 billion and $1.4 billion each year in combined income taxes thanks to Trump’s tax bill – and that doesn’t include how much Koch Industries would save in taxes and foreign profits or how much their heirs would benefit from the estate tax cut.

The average worker in the US would have to work for 25,000 years to become a billionaire.

How has the number of billionaires increased over the past few decades? In 1996, 423 billionaires were spotted. In 2019, that number has increased to 2,153. Billionaires represent just 0.00003% of the world’s population, but now hold the equivalent of 12% of GWP (gross world product) and a much larger percentage of the world’s total wealth. Even as COVID destroyed the economy, billionaires got richer – by $10.2 trillion.

Defending the Billionaire

Arguments used to defend billionaires are often based on the hysteria that without billionaires, society would not progress – innovation and philanthropy would decrease – making life worse. Facebook CEO Mark Zuckerberg, worth $70 billion, explains this in an appearance on Fox News. Billionaires aren’t supposed to exist in a “cosmic sense,” but in reality, most of them are just “people who do really good things and help a lot of other people.” He warned of the dangers of giving the government too much control over one’s wealth, allegedly being forced to stifle innovation and competition and “deprive other billionaires of the market” and funding for philanthropy and research.

“Some people think, okay, well, the issue or the way to deal with this kind of accumulation of wealth is:” Let the government take it all, “Zuckerberg said. “And now the government can decide all the medical research that will be done.

So who decides what research will be done? The pharmaceutical companies? The billionaires themselves? There is a strong belief that allowing billionaires to make decisions about societal priorities is deeply undemocratic. Should mega-billionaire donors like Bill Gates be philanthropic, ascribing to themselves the role of democratic governments in deciding what social problems to solve and how?

Even when it comes to innovation, Zuckerberg is wrong. The Information Technology and Innovation Foundation (ITIF) reports that while in the 1970s nearly all innovation leaders came from corporations acting alone, more recently more than two-thirds of the wins have come from public-private partnerships involving business and government, including federal labs and federally funded, university research. Moreover, in 2006, 77 of the 88 U.S. entities that produced award-winning innovations were recipients of federal funds.

Facebook, despite all of Zuckerberg’s statements about innovation, makes most of its profits from selling access to customer data, through advertising. Certainly not a source of social innovation.

Unfortunately, the history of billionaire activism is not always a good example in favor of respect for human values or even democracy. For example, the John Birch Society was mainly supported by Fred Koch, father of the infamous Koch brothers. Society attacked Martin Luther King and the civil rights movement, as well as JFK, with a campaign to spread hate just two weeks before his assassination in Dallas. This thread of regressive activism by billionaires continues today.

Some billionaires are not all that interested in the common good and not all that interested in saving the world.

Narrowing the gap between rich and poor?

What would happen if governments started to act for the common good? What would it mean for the world if we got rid of monopolies, stopped insider trading, prevented billionaires from buying politicians, and made it harder for billionaires and their corporations to avoid paying taxes?

You cannot, as the late Paul Polak used to say, “offer your way out of poverty”. Billionaires know that just giving money to the poor, is not a stable solution. It is often said: “don’t give fish to the hungry, just teach them to fish”. The task is how to create better education and better competence for people so that they can create value for others and be appropriately compensated for the value they create.

A review of the history of taxation in the U.S. shows what is happening: too many rich people have paid taxes on their wealth at lower rates than their secretaries. Today’s top marginal income tax rate in the US is 37%. This is the rate paid on the last income bracket, not on all income. A rich person pays much less than 37% of their total income. The 37% bracket only applies to those earning an annual income of $518,400 or more.

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