Last week the BBC hosted a daytime TV discussion on the subject of the super-rich and what they might do if the Labour Party wins the general election in the UK next month. The banner across the screen read: “Billionaire Exit Threat – Good Riddance.”
Very high net worth individuals would be wise to be wary of populism and its accompanying discontents. This is because the little guys attracted by the appeal of simple political messages not only have little time for “political elites” who have failed to deliver on their behalf but the business elites, also. Look what happened to Marie Antoinette.
I don’t need Elizabeth Warren telling me that I’m a deadbeat and that billionaires are deadbeats. The vilification of billionaires makes no sense to me
Populists are aware of the arguments that in the UK the top 10% of earners pay 60% of collected income tax. This will mostly have come from relatively high earning salary jockeys – top lawyers, accountants, and footballers. Not much of this is likely to have come from accumulated capital which is fleet of foot and beyond the reach of most tax authorities.
Thomas Piketty, the French economist and author of the best-selling book Capital in the 21st Century, taught the urban elite this back in 2013. Populists are on a moral crusade after the biggest of big bucks at a corporate as well as personal level.
In the US, Elizabeth Warren who seeks the Democratic nomination for president has devised a new tax scheme for the very very wealthy. She proposes a federal wealth tax of 2% on assets above $50 million and a further 1% surtax on for “ultra millionaires” on assets above $1 billion.
Under this scheme Bill Gates, she has calculated, would be forced to cough up $6.4 billion annually. Gates joked weakly that “I’m starting to do a bit of math about what I’d have left over.” Gates is at least willing to give the issues of global inequality some thought and has concluded that “ gender and geography” are the two biggest obstacles to fixing it.
The political and economic power wielded by the approximately 750 wealthiest people in America has become a sudden hot topic in the 2020 presidential election, as the nation’s billionaires push back with increasing might against calls by liberal politicians to vastly reduce their fortunes not to mention their political clout.
Leon Cooperman, the billionaire CEO of Omega Advisors, was driven to tears live on CNBC at the prospect of a raid on his fortune.
He told the US network: “I don’t need Elizabeth Warren telling me that I’m a deadbeat and that billionaires are deadbeats. The vilification of billionaires makes no sense to me. The world is a substantially better place because of Bill Gates, Michael Bloomberg, David Rubenstein, Bernie Marcus, Ken Langone,” he said. “This is idiocy! It’s appealing to the lowest common denominator and basically trying to turn people’s heads around by promising a lot of free stuff.”
The Labour Party in the UK began its election campaign with a “naming and shaming” of a group of the super-rich whom it promised to squeeze until their pips squeak. Out were rolled an eclectic list of billionaires which included media tycoon Rupert Murdoch, the UK’s wealthiest individual Jim Ratcliffe, retail billionaire Mike Ashley of Sports Direct, and hedge fund financier Crispin Odey.
This was probably water off a duck’s back for Murdoch but for the 28-year-old 7th Duke of Westminster being accused of “social cleansing” will have hurt. A low profile was always the preferred modus operandi for the Grosvenors.
“Together, we can pull down a corrupt system,” promised Jeremy Corbyn, the Labour Party leader, “And build a fairer country that genuinely does care for all.”
His shadow Treasury minister Clive Lewis went further than the bearded Che, Castro and Chavez supporter, telling the BBC’s Newsnight programme: “Billionaires shouldn’t exist. It’s a travesty that there are people on this planet living on less than a dollar a day.
Quite who defends free-market capitalism as we enter the third decade of the 21st century is an important question. Few are currently raising their hands. Even the Financial Times has announced that liberal capitalism requires a reset as its new Moral Money strand states that “the long term health of free enterprise capitalism will depend on delivering profit with purpose.”
So, to quote VI Lenin, “what is to be done?” Way back in 1990 12 OECD countries had super wealth taxes but by 2017 this number had reduced to just four – Switzerland, Spain, France and Norway. They do not appear to work.
But the widening wealth gap will not go away. Warren Buffett has made the point that he pays less tax percentage-wise on his income than does his secretary. Buffett was also the founder with Bill and Melinda Gates of The Giving Pledge in 2010 which now has 204 signatories from 22 countries promising to give away half their wealth to philanthropic causes.
This is unlikely to be enough. Left of centre governments dislike philanthropy because they want to be able to choose themselves where money is spent – on schemes such as that proposed by UK Labour to renationalise BT’s Openreach and provide free broadband for all. Including, presumably, The Duke of Westminster, Mike Ashley et al.
So, if they are genuinely under threat where do they go? How do High Net Worths globally get together and argue their case? How do they lobby and put forward their cause?
Much of this is done for them by private banks. UBS produced a 2019 report highlighting their social usefulness in early November but even this was slightly nuanced. “I am not saying billionaires should be heroes,” said Josef Stadler, head of the ultra-high net worth unit at UBS. “But at least they should be recognised.”
Recognised for what is the answer. What is the purpose of the super-rich? Because the only people who worry about money more than the poor are the fabulously wealthy. They need a few self-justifying answers beyond some vague Adam Smith trickle-down type concept.
Matthew Gwyther, the former editor of the UK based publication Management Today, writes a regular column on business for The Times of London