Forbes’ 793 Billionaires
Wealth and Plutocracy
Pierre Tristam/Candide's Notebooks, March 27, 2006
Forbes’ annual ranking of the world’s billionaires is out along with its familiar faces: Bill Gates at the top with $50 billion, which is more than the total GDP of individual countries like Morocco, Kuwait, Croatia, Luxembourg and about 150 others, or more than the combined GDP of a dozen country or two, depending on where you begin counting (Iceland’s total GDP is a measly $12 billion). Warren Buffet is next at $42 billion, followed by Carlos Slim Helu, at $30 billion, a Mexican with a Lebanese name, and on down the line, including the gang of five Waltons, each of whom clocks in at $15 billion-some for a sum-total of $78.9 billion.
Three years ago there were 476 billionaires. Now there are 793. In a column last week, Michael Kinsley made a couple of auto-contradicting observations: “Some people automatically associate great wealth with evil, and they deserve the ridicule they get. But the automatic association of great wealth with virtue is equally fatuous.” He then followed with this equally fatuous line: “It’s probably true that most billionaires have acquired their wealth in ways that make life better for the rest of us.” The last line assumes a cause-and-effect link between wealth and material virtue, or creativity, that adds up to this: The wealthier you are, the more you’ve probably contributed to the general well-being. But the argument is easily defeated on several counts. First, this notion that it’s ridiculous to associate great wealth with great evil. Why ridiculous? Kinsley would not dispute Lord Acton’s adage that power corrupts, and absolute power corrupts absolutely. Money is power. Big sums of money is big power. You get the idea. Politicians aren’t corrupt because of the way they go about fighting culture wars on abortion clinics’ doorsteps. They’re corrupt because of the way they go about using their power to direct and divvy up the nation’s wealth—that $2.5 trillion the president and Congress play with in every budget. Power accrues where money does, and with it, the slouch toward corruption. Logically, it’s more accurate to say, as Kinsley does, that the automatic association of wealth with virtue is fatuous, but for a reason that makes the first part of his sentence untenable: Bucking money’s corruptive potential is the exception, not the norm. Therefore, the automatic association of great wealth with corruption (rather than evil, which is a straw word) is anything but ridiculous.
Second: Wealth accumulation becomes exponential by dint of the accruing profits of a single product or of investments; but creative “improvements” are more linear. That is, if Bill Gates is ten times richer today than he was ten years ago, he has not quite made life ten times better for those who take advantage of Microsoft products. He’s merely profited ten times more from—for instance—using his market power to lock in his windfalls, and possibly preventing life improvements for the rest of us by limiting competition. So the claim that his wealth has made life better is double edged. In fairness, the Gates foundation, which gives away at least $1 billion a year with an endowment of $25 billion, does make life better for a few million people in exponential ways, if one vaccine has the potential of multiplying life expectancy. Too bad the same can’t be said of the Wal-Mart empire. A look at the five Waltons on the list suggests that wealth of a certain size can just as easily become moribund in the hands of those who inherit it, keeping wealth from re-circulating in productive ways. (that’s the argument against ending the inheritance tax, incidentally—to prevent money from creating a sclerotic aristocracy). In Wal-Mart’s case of course, wealth is also accumulated at the top on the back of ridiculously paid employees at the bottom in a classic reproduction of labor’s exploitation with a smiley face (that yellow little bastard that imps about in Wal-Mart ads). Quick fact: Take $5 billion of the five Waltons’ $78.9 billion pot, or 6.3 percent, or what the $78.9 billion could generate through annual investments; divide the sum by 1.7 million, the total number of Wal-Mart employees. What do you get? A $1.40-per-hour wage increase per employee. The 1.7 million include management of course. They don’t quite need a wage increase. Exclude them you might be looking at $1.50 an hour. Recurring. But naaah. The Waltons are busy giving $1,000 charity contributions to local schools here and there. That’s plenty generous.
Third (to go back to Kinsley): To make a link between wealth and wellbeing goes against all the recent debunking, in fact, of such a connection when you look at CEO compensation and company performance. Different animal? Not really: boards are multi-headed incarnations of superrich individuals. They’re designed to reward according to performance. But there comes a point where performance and pay have no connection anymore (think professional athletes), and there comes a point where performance and pay run in opposite direction due to a prevalent culture of acquisition, one-upmanship, financial brawn, that overwhelms whatever sense of financial logic or fair compensation might have existed. Other people’s money. From Lewis Paper’s Brandeis, the biography of Supreme Court Justice Louis Brandeis: “To Brandeis there was no mystery as to why oppressive trusts had prospered in America. The companies simply offered stock to the public with high dividends. As long as those dividends remained high, the stockholders were prepared to back management. So management had the best of both worlds: someone else's money and the freedom to do as they pleased with it. ‘Large dividends,’ Brandeis commented, ‘are the bribes which the managers tender the small investor for the power to use other people's money.’” (p. 170). Some examples of other people’s money, circa 2000s: TimeWarner’s revenue between 2000 and the first half of 2002 was restated at $679 million less than reported at the time, yet it paid its CEO a $10 million cash bonus during the period. Xerox restated its revenue at $6.4 billion lower for the years covering 1997 to 2001, but gave its CEO a $5 million cash bonus during the period. (See “Sorry, I’m Keeping the Bonus Anyway,” New York Times, March 13.)
Now, it’s indisputable that, as Brad De Long once wrote, most people these days enjoy standards of living that “were beyond the reach of even the richest of previous centuries. Even lower-middle class households in relatively poor countries have today material standards of living that would make them, in many respects, the envy of the powerful and lordly of past centuries.” But to leap from this to crediting the super-rich for the transformation is to dive foolishness-first into the wealth-worship of the last two decades—the automatic association between wealth and virtue Kinsley referred to, skipping the middle-march of actual labor, governing and public discourse that has as much and more to do with steering a culture toward wealth than any single entrepreneur. Good brains are everywhere. It isn’t because Gates was an American in Seattle that he managed to become a billionaire, or that an individual in Ghana doesn’t because his brain is deficient. Circumstances don’t just help. They’re the driving force. The greater the wealth, the smaller the relationship between the individual’s labor, intelligence and wherewithal and that wealth, and the greater the relationship between it all and the circumstances enabling wealth’s accumulation. One of the last places immense wealth’s credit should go is to the person accumulating it. Which makes taxing that wealth at far greater rates the more defensible, virtuous way.