Billionaires in Pursuit of Equality

Ashok Nag

Milton Friedman assertedin his 1962 book Capitalism and Freedom, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.” This firm belief in market capitalism is no longer justifiable, as 62 years later, societies have become more unequal, and the market has not become more competitive.The growing gap between the rich and poor across nations has raised concerns about the long-term sustainability of market capitalism as the sole economic system.

The World Inequality report 2022, published by The World Inequality Lab, gives a comprehensive data-driven summary of the present level of global inequality. The main findings of this report are:

1.   The richest 10% of the global population currently takes 52% of global income, as against 8.5% earned by the bottom 50%.
2.   Global inequality becomes more pronounced when we consider the distribution of wealth. The poorest half of the global population owns only 2% of total assets (measured in terms of PPP USD), while the richest ten percent controls 76% of the wealth. The average value of assets owned by an individual in the bottom 50% is just US$ 4,100, while an individual in the top 10% owns an average of US$ 771,300
3.   In the USA, the top 10% has increased their income share from 34% in 1980 to 45% in 2021 and a drop in the bottom 50% (from 19% to 13%). As regards wealth, the share of the bottom 50% is as low as 1.5% as against 70.7% of the top 10%.
4.   Although the income inequality of China is little less than that of the USA and India, in terms of wealth inequality it is at par with USA. The income share ratio of the top 10 % to the bottom 50% is 14 in China as compared to the corresponding shares in India (21) and USA (17). In terms of inequality of wealth, China is at par with the USA.

The sustainability of this level of inequality, both in terms of wealth and income, without any social upheaval, is of deep concern to the advocates of market capitalism with a reform. The origin of the idea of ‘stakeholder capitalism’ by Klaus Shwab, stems from this concern. Klaus Shwab, a professor and founder of the World Economic Forum (WEF) started an annual business conference in 1971 in Davos, a ski resort, near Zurich, Swizerland to bring together all stakeholders, as identified by him, on a single platform. The stakeholders are- Governments, Civil Society (including but not limited to, Unions, NGOs, schools, Universities, and religious organisations), Business enterprises (including corporates, small and medium-size enterprises, freelancers amongst others), and the International Community (including UN, WHO, OECD, etc.).

One fundamental assumption of this concept of stakeholder capitalism is-“Private individuals and companies must be able to innovate and compete freely”. The WEF has more than 100 strategic partners, apparently, “each selected for their commitment to improving the state of the world”. It is difficult to find anything specific about the social concern of these multinationals, except their relentless pursuit of higher market share and profit. It would not be an exaggeration to say that this concept of Stakeholder Capitalism is a perfect example of a Bengali proverb–a stone bowl made up of gold.

Along with this movement for Stakeholder Capitalism, groups of wealthy millionaires in developed countries have started a parallel movement for higher taxes on the super-rich to mitigate the social abhorrence for prevailing extreme inequality in the advanced countries. The organisation spearheading this movement is Patriotic Millionaires, founded in 2010 by Erica Payne. Members of the Patriotic Millionaires are business people, investors, and philanthropists with annual incomes of at least $1 million and/or assets of at least $5 million. The motto of this organisation is “a highly progressive tax system, a livable minimum wage, and equal political representation for all citizens.”

The organisation started a signature campaign, titled “Proud to Pay More”, an open letter to the participants of Davos 2025. The letter starts with the following lines:

We are surprised that you have failed to answer a simple question that we have been asking for three years: when will you tax extreme wealth? If elected representatives of the world’s leading economies do not take steps to address the dramatic rise of economic inequality, the consequences will continue to be catastrophic for society.

The letter ends with the following lines:

The true measure of a society can be found, not just in how it treats its most vulnerable, but in what it asks of its wealthiest members. Our future is one of tax pride, or economic shame. That’s the choice.

We ask you to take this necessary and inevitable step before it’s too late. Make your countries proud. Tax extreme wealth.

260 millionaires and billionaires have signed this letter. The letter calls for a 2% tax on people with more than $10 million wealth.

This exhortation to fellow millionaires by an enlightened section of the wealthy citizen may sound a great leap forward for making society equal. However, a little digging into this proposal would prove that all these pro-poor policy recommendations are “full of sound and fury” signifying nothing for the wretched of the society. According to Forbes data on billionaires, the total wealth of the USA billionaires in 2022 was 4.7 trillion USD. A 2% wealth tax only on these billionaires would have fetched in that year only 94.02 billion USD. If one considers all millionaires, their total wealth, assuming all of them belong to top 10% of the wealth owners, would have been 6.46 trillion in 2022. A 2% wealth tax on them would have fetched at the most 130 billion USD. In 2022, the total US Tax receipts worked up to 4.54 trillion USD. Thus, around 130 billion in wealth tax from the rich would add only 2.8% to the existing kitty. It is anybody’s guess how much dent it will make to the existing inequality. The US newspaper Boston Globe has best described these “Tax the Super Rich” people as those who are “uncomfortable with having fortunes in a world of misfortune.”

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Frontier
Vol 57, No. 34, Feb 16 - 22, 2025