A World Without Billionaires

Are billionaires good for the world?  Is hyper wealth an important and necessary component of capitalism or is it a poison that has a toxic effect on our social compact?  Does it stockpile resources that could otherwise lead to a more harmonious economy if they were more evenly distributed?

The super wealthy capitalist is seen as a lynchpin of the capitalist economy and is fantasized in almost mythological terms.  He or she is the one who will risk all for an ingenious idea, who will mortgage the family home and work 7 days a week to take a tiny Mom and Pop venture to a mega corporation.

The necessity of having the fabulously rich in society is rarely questioned.  But let’s look at the underlying principles and see if they are really so axiomatic.  I can see three basic ideas that are said to undergird this so-called necessity:  (1) the free market will necessarily produce the super wealthy and should not be inhibited, (2) capitalism needs the super wealthy to fund new ventures, and (3) people will not be motivated to create new businesses if the reward of becoming super wealthy is no longer there as an incentive.

The first justification is a circular argument.  The free market and its legendary ‘invisible hand’ is not an absolute.  There are already many adjustments being made to the ‘free market’ because of the complex interwoven nature of post-industrial society and global economies.  The market may allow a huge amount of wealth to move in one direction (the absurd amount of money that is captured by wall street and various money managers is a classic example) but that does not mean that it should stay there or that the ‘market’ would somehow be harmed by its re-direction.

The second argument, that the super wealthy are needed as venture capitalists, is more difficult to counter.  I would argue that the super wealthy and the venture capital ‘society’ become a club and self-fulfilling prophecy for new ventures.  Is the serial entrepreneur repeatedly successful because of some rare genius or simply because he or she now has access to a club of mutually supportive wealthy people who promote one another’s ventures both from a financial and marketing perspective?

I suggest that the new, more egalitarian forms of providing capital – kickstarter and other Internet-based mechanisms - are better sources of funding.  And remember that most great businesses did not need that much capital to get started.  The modern examples of massive venture funding and huge losses before success is achieved are perhaps examples of forced business growth by the plutocracy, rather than organic, democratic growth.

The 3^rd argument, that entrepreneurs would not be motivated to take the risks and sacrifices necessary if they are not hugely rewarded, is amusing to me.  Aren’t capitalists idealized as noble spirits whose passion to create a new concept or business is what drives them?  Isn’t the joy of creation and the feeling of accomplishment sufficient reward?  Isn’t the challenge of building something and seeing it flourish the true motivation for entrepreneurs?  I am quite certain there would be more than enough gallant entrepreneurs who would be inspired by these goals. I suspect they would probably be a better class of entrepreneur in many ways.

And we are not talking about denying successful people their financial rewards.  Any successful entrepreneur will have plenty of money.  We are simply talking about taking the massive wealth – tens of millions or billions of dollars – that are generated by new businesses and feeding them back into society through infrastructure development and tax cuts to the working poor and middle class.

Re-directing the huge wealth that might otherwise go into billionaire’s pockets into a wider population would have many benefits.  The public use for large infrastructure projects would become the basis for the next generation of businesses and technologies.  Education through university, trade school and even graduate school for the entire population could easily be financed.  And the money that would find its way back into the population at large through tax breaks would be spent in normal consumer fashion and thus stimulate the economy much more than it would sitting in the vast holdings of some billionaire.

It is often theorized that the massive wealth of billionaires is necessary for investment.  But investment is neither necessary nor worthwhile unless there is demand.  Returning the profits back to the workers will create that demand.  Investment will surely follow and there will be no dearth of capital.

As to how to achieve a world without billionaires, that is not a simple issue, but it is certainly attainable.  Heavy individual income taxation such as occurred in the 1950’s in the U.S. is one option.  This taxation would have to target stock sales and overall wealth as well as income. The tax would have to be careful to allow full compensation for the investment and sacrifice that is made and provide a reasonable level of wealth without allowing too much to accumulate. 

Another is to heavily tax corporations that benefit from monopolistic trends, such as Apple, Amazon, Google and others.  This taxation would avoid the negative repercussions of tech dynasties and overly powerful mega-corporations.  The taxation might limit some innovation in these companies, but having that innovation spread more evenly across other companies is a better long-term situation.

In the end, having no billionaires (and eliminating even the next several layers down) and no mega-corporations would lead to a much healthier socio-political environment.  Power and wealth are too closely related, and they make for a toxic mix that is becoming ever more dangerous for our fragile world.