Last summer I was invited to take part in two small private events attended by many US, European and Asian billionaires, some worth many tens of billions. The events were fun and stimulating, and many of the billionaires were good company.
But spending time with them crystallised for me just how big a billionaire problem the world now has, and why solving it may be a precondition for successful action on so many of the other problems we face. It also crystallised for me that we have a problem even thinking about billionaires and possible remedies to the problem they present.
It’s easy to see these extraordinarily rich individuals as just a bit of entertainment—colourful mavericks—or perhaps an inevitability: the rich, like the poor, being always with us.
But this misses the point. The sheer power and reach of the billionaires blocks thought and action on many fronts. They hold great sway over the state of the economy. They dominate much of our politics—with one possibly soon to return as US president and another potential billionaire ruling Russia.
Britain’s prime minister is the richest the country has ever seen, with family wealth of over half a billion—and his recent, fawning interview with Elon Musk an extraordinary example of the deference of politics to money.
Figures like Rupert Murdoch and Mark Zuckerberg influence the thoughts of millions. And, through philanthropy, billionaires loom over the arts, universities, and civil society too.
This drift to plutocracy doesn’t just mean unaccountable power and (in many cases) tax avoidance and evasion. It’s also contributed to chronic waste and an extraordinary mismatch between billionaires’ pools of enormous wealth and the innumerable tasks in the world that require money. Yet so many fields are now dependent on them that few dare even discuss the potential remedies.
Belatedly, and tentatively, the landscape is starting to shift, partly because governments are becoming desperate for tax revenues. A group set up to advise the EU on tax policy recently warned that billionaires were paying far less tax proportionally than people on average incomes (with effective tax rates amounting to just 0–0.6 per cent of their total wealth). The group advocated a new global levy on this wealth which looks likely to be discussed at next year’s G20 summit in Brazil. As I’ll show, this is just one of many possible answers that are starting to be taken seriously.
My perspective partly comes from looking at the facts and the gap between where money is and where it’s most needed. But it’s also shaped by having spent quite a bit of time with the very rich. I’ve never been especially wealthy myself (I live in Luton, not Knightsbridge). But I have been hosted by Mukesh Ambani, Asia’s richest man, at his home in Mumbai—the world’s most expensive private residence. I’ve been on a pub crawl with Jeff Bezos and I’ve been entertained at a Russian oligarch’s French chateau. I even dated an Asian billionairess for a couple of years. I don’t see them all as cartoon caricatures or pantomime villains. But I do see them, as a class, as significantly to blame for the state of the world.
Let’s start with the facts, which are mind-boggling. Over the last decade, globally, the richest 1 per cent have taken about half of all new wealth, and in the two years to December 2021 it was two thirds—twice as much as the other 99 per cent—leaving the world’s 3,000 or so billionaires worth some $13tn. In other words, we are seeing an extraordinary concentration of wealth at a time when much of the population of rich countries such as the US and UK have seen stagnant or falling incomes. There may be a justification for such a remarkable imbalance of rewards, but I’ve never heard it. Similar patterns in the past often led to violent responses—a brilliant recent book on this is Éric Vuillard’s The War of the Poor, which documents the times, particularly in 16th-century Germany, where the poor massacred the rich in large numbers before themselves being mown down by mercenary troops.
Why is this concentration happening? F Scott Fitzgerald is supposed to have once said to Ernest Hemingway, “You know, the rich are different from you and me,” to which Hemingway replied, “Yes. They’ve got more money.” But that’s only half the picture. To understand why the billionaire class has become so much richer you have to dig into the interaction between their own behaviours and addiction to money, and an environment that gave them free rein.
There may be a justification for such a remarkable imbalance of rewards—but I’ve never heard it
No billionaire needs all their money. Nor do their children. Most could give away 90 per cent, even 99 per cent, of their wealth and still enjoy unimaginably opulent lifestyles. But they struggle to process this and can become addicted to accumulating and hoarding money, often justifying it to themselves as part of their duty to their children. Many work hard to avoid situations where the question of whether they really need the money would arise: hanging out with their peers (just as other addicts do), or with employees, or with sycophants. In part this is justified by the problem that they don’t know who to trust—since anyone who isn’t super-rich may just be after their money. Questions such as “how much do you need?” (the subject of Tolstoy’s classic short story “How Much Land Does a Man Need?”) or “how much is enough?” are difficult for them to grapple with.
Some billionaires do live quite modestly, and for some money is a means and not an end, a way to make things happen. But for a significant number—perhaps a majority—the means has become the end.
Part of the problem is addiction. But another factor, for which governments and others share the blame, is a distorted view of efficiency. The billionaires have often made their money through rigorous attention to efficiency in production—in oil or software, finance or manufacturing (though some just inherited it, or, like many Russian billionaires, exploited political cronyism to make their fortune). They are often fanatical about ensuring that their money is well spent, without waste, in their business projects.
Yet they have no equivalent concept of efficiency in consumption, so it seems entirely natural that they should own multiple homes, cars and other things that are only very rarely used. They are often extraordinarily lavish in their lifestyles (Stephen Schwarzman, billionaire co-founder and chairman of asset-manager Blackstone and a big donor to Oxford and other universities, became notorious for his extravagant parties, but he is not exceptional).
This is a blind spot for economics, which might be expected to provide some insights into the behaviour of people with such great wealth. Mainstream economics has little to say about inefficiency in consumption as opposed to production. Ask a typical economist and they will tell you that while a factory that’s closed half the time is inefficient, it’s perfectly efficient for a rich man to own 20 houses even if most of them are empty most of the time. Yet every undergraduate student of economics learns the concept of diminishing marginal utility—the idea that the more you have of something, the less additional good it does you—which should make it obvious that an extra $10,000 for someone who already has $10m or $1bn has zero effect on their wellbeing, whereas it might have an enormous impact on someone who only earns a few thousand.
Climate change, arguably the most important issue we face, is an even more striking example of the imbalances. The billionaires know about it, of course. But I find they rarely mention it spontaneously and pretty much all billionaires disproportionately contribute to emissions. Indeed, one study of 125 of the world’s richest billionaires found that their average annual emissions are a million times higher than those of someone outside the richest 10 per cent of humanity, not least because of their preference for private jets (one reads reports of the super-rich sending their private jets thousands of miles to pick up a pet).
No billionaire needs all their money. Nor do their children
In some countries, politicians have tentatively floated policies that might reduce the climate damage of the very rich, for example by banning private jets. But that such options are so rarely mentioned is a sign of how effectively the billionaire class has essentially bought much of politics, which helps them avoid facing up to their addiction.
It's not surprising that conservative parties depend on donations from the rich, or that they should have given so many tax breaks to the super-rich. But in the US and the UK, much of the centre left also became dependent on them. A glaring example was Bill Clinton, whose Clinton Foundation has received large gifts from billionaires, and who has spent much time in their company—including, as we now know, flying on Jeffrey Epstein’s private plane after he left the Oval Office.
Another is Tony Blair, whose Institute for Global Change likewise reportedly receives much of its income from wealthy royals, autocrats and billionaires (he also became personally close to many of the super-rich, from Silvio Berlusconi to Rupert Murdoch). Although Clinton and Blair promote sensible policy proposals on many topics, they rarely touch on the elephant in the room: the world’s massive inequalities of wealth.
Meanwhile, Keir Starmer’s Labour party now receives its biggest financial support from David Sainsbury, valued a few years ago at $1.1bn. The move to balance up the generous gifts of conservative billionaires is welcome. But it’s an odd position for a party set up to represent the interests of the working class.
Around the world there are similar patterns of apparent influence and capture. On coming to office, Emmanuel Macron—once an investment banker and recipient of funding from some of Paris’s super-rich—quickly abolished a modest wealth tax. Narendra Modi’s BJP receives three times as much in donations as the next six Indian parties combined, and he has been careful to keep the richest tycoons onside as they have disproportionately benefited from the country’s booming economy. And Vladimir Putin is himself probably a multi-billionaire, with an apparently insatiable appetite for superyachts.
China is the partial exception to this rule, as the Chinese Communist Party has cracked down on billionaire power, with Xi Jinping calling on the party to “resolutely oppose the unlimited sprawl of capital” (though his own family too appears to be hugely wealthy). But elsewhere it’s only the far left that dares to say obvious truths about the imbalances of wealth in the world, along with a few charities like Oxfam. The rest of the political spectrum has been silenced.
If billionaires like power, many are also obsessed with old-fashioned status, which leads to subtler kinds of waste. Like the Carnegies, Fords and Rockefellers of a previous era, they don’t want to be seen as nothing more than their money, and so try to tap into other sources of esteem (and spend generously to massage their reputation, for example removing negative stories from the internet and promoting the positive ones).
I recently heard one billionaire speak proudly of how much money he had raised for Harvard. Harvard has many virtues (full confession, I had a role there for a few years). But it doesn’t need more money. Its endowment is already worth over $50bn and it struggles to know what to do with such extraordinary wealth. Oxford and Cambridge, Stanford and MIT also have money pouring in from billionaires for often fairly spurious projects and initiatives (AI ethics being especially popular). They are happy to take cash in exchange for conferring a bit of status on the ultra-rich.
Some of what’s funded is entirely virtuous. But, overall, the marginal impact of this money is probably much lower than it would be elsewhere and, generally, billionaires seem more comfortable giving money to initiatives which already have a lot of money: a perverse version of what economists call the “Matthew effect”, which reduces the impact of their donations.
So what should be done? I am not an anti-capitalist. I believe that market economies often do a good job of promoting innovation and efficiency. But anyone who has studied capitalism in any detail—from Adam Smith onwards—knows that it rewards both creation and predation, both what I’ve called the “bees” and the “locusts”. Many get rich through the virtue of their ideas and their business acumen. But many also get rich through success in extracting value from others. The key to understanding capitalism, in other words, is that it is both a positive-sum game and a zero-sum game.
There are times when the rewards flow generously to innovators and creators. But there are other times when rewards flow to rentiers, providing unwarranted windfalls to the lucky, the well-positioned or those who have fixed the rules of the game in their own interest.
We are now in one of those eras. The vast shift of wealth over the last decade or so does not primarily reflect the genius of billionaires, but rather structural flaws in our systems that have given their addiction to money free rein.
Anyone who has studied capitalism knows that it rewards both creation and predation
Not every billionaire is oblivious to just how unbalanced the world has become, and one suggested answer to the problems described above is more philanthropy, including the “Giving Pledge”, promoted by Bill and Melinda Gates and Warren Buffett since 2010, with billionaires committing to give away a majority of wealth either during their lifetime or in their will. The Giving Pledge website talks of “solidifying a new social norm that billionaires should commit to giving the majority of their wealth to philanthropy to address society’s most pressing needs.”
This might seem like a pretty minimal commitment, since it would still leave them with vast wealth far beyond their needs. But although some 240 of the super-rich have committed to the pledge, it is very difficult to find any hard data on how much money has actually flowed. As so often in this field, there’s a lot of performative goodwill but very few facts. I don’t doubt the sincerity of the founders (though history shows how often plutocrats delude themselves that they are the best solutions to their society’s problems and even the best placed to avert wars). But philanthropy alone is unlikely to have any noticeable effect on inequality.
Another group has taken a more systemic approach. Some 200 super-rich, calling themselves the “Patriotic Millionaires” and self-described as “a group of high-net worth Americans who share a profound concern about the destabilizing level of inequality in America,” urged those in attendance at Davos earlier this year to “tackle extreme wealth” and “tax the ultra-rich” to help relieve the cost-of-living strain hitting ordinary households.
However, as far as one can tell, the proposals have failed to win round the billionaire class—none of whom like talking about tax. Indeed, most billionaires have a visceral hatred of taxation and will go to remarkable lengths to avoid it (though they often choose to spend much of their time in high-tax locations, such as Paris and London, they like to keep their money offshore, in locations like Monaco). Many share the view of the American businesswoman Leona Helmsley, who once commented that taxes are for the little people.
So, if philanthropy is unlikely to achieve much, could a shift in economic thinking help guide governments to more intelligent policies? I’ve already mentioned how little orthodox modern economics has to say about either the wealth or the power of billionaires. It has no theory of money addiction, for example—its theories explain why you might work or take risks to gain utility, but it has no explanations for why billionaires accumulate money that has no effect on utility, in just the way that other addicts start by being attracted by the kick and then become trapped by it.
A decade ago, I proposed very high taxes on wealth over a certain level—such as £10m—unless it was channelled into philanthropy. The idea was that billionaires could get some of the recognition they craved and use their money to do good in the world, while avoiding the chronic waste associated with endlessly accumulating wealth. But I couldn’t get any economists interested in even debating the merits of the proposal.
Philanthropy alone is unlikely to have any noticeable effect on inequality
More recently, however, a handful of the smartest economists have started to seriously attend to both the facts and the policy options. The Nobel Prize-winner Joseph Stiglitz has consistently campaigned for higher taxes on the very rich and this year’s John Bates Clark medal, the most prestigious prize for young economists, went to Gabriel Zucman, who has made this his prime interest, alongside important work on the role of tax havens in supporting the billionaire class.
Thomas Piketty is the most prominent economist to take inequality seriously and has proposed taxes of 90 per cent for wealth over $1bn, as well as a return to much higher marginal rates of income tax (he points out that from 1932 to 1980, top marginal income tax rates averaged 81 per cent in the US and 89 per cent in Britain—periods that included their fastest-ever economic growth). His data showed that in the US, the top 1 per cent earn over 20 per cent of national income while the bottom 50 per cent earn just 12 per cent.
These analyses are being listened to more attentively, because government and central bank policies that pumped vast sums of money into economies after the financial crash and through the pandemic allowed billionaire wealth to grow even more effortlessly. Governments that are likely to be desperate for tax revenues in the coming years—thanks to slow growth, rising defence spending and rising care costs—can’t forever ignore the paltry contributions of the ultra-rich.
As a result, the political landscape looks set to shift, helped by this new interest from economists. The next G20 summit will likely discuss the EU Tax Observatory’s proposal for a global minimum 2 per cent annual tax to be levied on the wealth—rather than the income—of the world’s richest people. It’s estimated that this might raise over £200bn a year. The idea is an extension of the 2021 agreement between 140 countries and territories to impose a global minimum tax rate of 15 per cent on the biggest multinational companies. Even five years ago, the idea of a minimum corporate tax was widely dismissed as implausible; that it is happening is a reminder of how fast conventional wisdoms can, sometimes, change.
Too many worry about what their peers think now, rather than what the world might think a generation from now
So far, though, the shift is only tentative. In the UK, for example, Labour is resolutely opposed to any wealth tax, even though the logic points clearly in the direction of reforms that spread the tax burden to property of all kinds (for more, see this excellent recent piece). The claims that higher taxes on the very rich would lead to a stunting of growth, or a mass exodus of the wealthy, simply don’t stand up to scrutiny. Far too often our systems simply give windfall gains to people who have done little or nothing to make the economy more productive. As one example, the biggest gainers from advances in the UK’s knowledge-based and creative economy have probably been property owners in the big cities, such as the Duke of Westminster. They’re not well-known for their creative or innovative flair, but have seen the value of their land in places like central London and Manchester surge in value thanks to shifting economic geography.
My own policy agenda for addressing the billionaire problem would include a radically different approach to tax, particularly of wealth—recognising that taxes will need to be quite diverse to handle property (including empty homes kept just as investment assets), land, financial assets, artworks and so on. Also important would be restrictions on private jets and other extreme forms of hyper-consumption; and ending plutocrat control of the media and social media. At a minimum we should be debating the virtues of these options—and proposing others—rather than seeing them as out of bounds.
Whether or not these specific ideas materialise, it looks likely that some kind of crunch is coming. There are historical parallels, such as the end of the 18th century, when the huge accumulations of wealth in the hands of the landed aristocracy shifted from being seen as natural to being seen as an impediment to social and economic progress (and led to quite a few losing their heads in the French Revolution). Or a century later, when a generation of tycoons came to be seen, in the US at least, as malign monopolists who needed reining in with anti-trust laws, rather as than brave entrepreneurs.
As in the past, the main solutions will have to come from politics and government. But some of the billionaires might themselves lead a shift of culture, one that involves asking “what is enough?” and turning away from profligacy and waste. Many billionaires are clever, curious and blessed with insights, not just into business but also science and culture. I find it odd that so few have anything wise to say about their own class and its impact on the world. Too many worry about what their peers think of them now, rather than what the world might think of them a generation from now. I have some hope in the next generation, many of whom are much more ecologically and socially conscious than their parents.
There’s nothing wrong with being rich, especially if it’s a reward for hard work, ingenuity and imagination. But there is a lot wrong with being rich and unable to grasp the meaning of your wealth and its effect on the world around you. For now, few billionaires appreciate that the power of their class, their grip both on politics and on communications, and their hoarding and promotion of waste on a massive scale, appals many today and is likely to appal future generations. It remains unclear whether this elite will be wise enough to temper its excesses or whether the failure to do so will, in the end, lead to a sharper and more brutal correction.