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Blaming It On the Billionaire

Redistribution is highly seductive, but don't let it fool you. The zero sum fallacy of wealth distribution is not an argument; it's a delusion.

Billionaires were said to be getting nervous in the early stages of the Democratic primary. Now that we have a Democratic presidency, should they still be nervous? Anti-capitalism is currently on the back-burner as a media story. The Occupy Wall Street crusade, still newsworthy in 2015 has, since then, more or less petered out for lack of attention. And this despite an, apparently, ever growing concentration of extreme wealth in the hands of the wealthiest 1% or 0.1%. But Progressive virtue signalling has, of late, been largely otherwise engaged. The Donald Trump presidency was greeted with mesmeric horror; like a scary creature emerging from some alien spaceship suddenly landed on American soil. The entire gamut of bien pensant opinion has been simultaneously bewildered, outraged…and obsessed by this strange, uncouth Beast, so untutored in the correct ways of political-media-speak. The perceived need to beat it back has been all consuming. But there has palpably also been a delicious–and addictive–aspect to all this outrage and Wokedom is going to miss it. Post-Trump–and with an ongoing pandemic blame-game–the big-media brands might soon find themselves in need of new bogeyman fixes. This recent Time magazine article gives a clue as to the form this might take.

According to Time: “in addressing the causes and consequences of this pandemic – and its cruelly uneven impact – the elephant in the room is extreme income inequality. How big is this elephant? A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades.” Economics as a zero sum game in other words. Given enough media encouragement, few things are more guaranteed to arouse outrage than media reports comparing the wealth of billionaires and zillionaires to that of ordinary folk. For some it will be born of envy and, for others, a reaction to the ‘unfairness’ of it all. Censoriousness about the excesses of princes and plutocrats is nothing new. In essence it probably goes right back to the dawn of civilisation and, in moderation, is understandable and mostly harmless. But when coupled to the superficially plausible notion that the billionaire’s billion dollars has been ‘taken from’ the rest of us (and that the rest of us are a billion dollars less well off as a consequence) it has the potential to foster a political climate that would impoverish us all. 

To illustrate the fallacy in this kind of thinking, a game of If I Were a Rich Man can be illuminating; i.e. imagining oneself as a billionaire. (Such fantasies are, of course, another ubiquitous human emotion; albeit a more light-hearted one than the smouldering envy kind). So…if you had all the money in the world, you would…?? Yes, what would you do? Well, you would of course have a string of luxury homes dotted around various plutocrat hotspots of the globe….and a staff to run them all. And let’s suppose you would also commission for yourself a luxury yacht and a private jet to ferry you, at a whim, from one home to the next. Plus of course so many luxury motor cars you wouldn’t even be able to count them all. Add to all this luxury hardware and fixed overheads (insurance, staff, etc.) a great army of other people to manage your luxurious lifestyle for you…to fawn over you and handle all the boring stuff:  tax consultants, style consultants, health consultants…and bodyguards of course. You’d have parties, the finest wines, caviar and so on. You’d spoil all your sexual partners with largesse to keep them sweet on you. You might indulge yourself with a stratospherically expensive personal art collection and you might buy yourself a football club as well. You’d indulge yourself in fact with every last thing you could think of.

Two truths emerge from this What If fantasy but they are truths that can be somewhat counter-intuitive.  The first truth is that no human being, however greedy, can possibly personally consume billions of dollars. It cannot disappear down their throats in other words–or into their safe. I suspect that many people do not–not consciously anyway–fully comprehend this truth. What the billionaire’s wealth does give them is a large degree of control over other people’s livelihoods. It does this both directly as described above plus indirectly in the way they choose to invest their huge capital assets. 

The second truth is that every cent of the billionaire’s wealth, whatever they decide to do with it, is, at the end of multiple lengthy transactional chains, someone else’s livelihood. This applies to every piece of hardware and services consumed by them, whether directly or indirectly. And the greater part of those myriad transactions will be the salaries of countless thousands of employees in various manufacturing and service industries. All the way from relatively well-healed professionals, to office workers, factory workers, shopkeepers, waiters and cleaners. Even the millions paid for the private art collection will release capital that will end in someone else’s pocket, somewhere in the world; ultimately millions of pockets.

Not all indictments of extreme wealth inequality are fallacious of course. The billionaire’s billions will not benefit only, or even primarily, his or her own countrymen. An understandable, if romantic, ethic of economic patriotism persists not far below the surface in most societies. But the would-be economic patriot should reflect on the fact that, in a globalised economy, this is going to also be true of their own personal spending decisions whether they like it or not. They will have benefitted someone somewhere on the planet. 

The greatly increased power compared to the rest of us that a billionaire has, resides in their much greater ability to direct where the money goes. They can invest their billions in these businesses and these enterprises and decline to invest in those other ones–ones that may also be desperate for their investment. All this will have real consequences–for good or ill–for somebody. 

It is a perfectly valid stance to dislike, or feel disdain for, the gluttony that often (but not always) goes hand in hand with extreme wealth. Valid, that is, as long as it is underpinned by some basic philosophical conception of what generates (in Adam Smith’s famous phrase) The Wealth of Nations. I personally–and probably most readers of this article–believe that some form of free market capitalism (billionaire’s and all) offers the best–or least worst–economic model for allocating resources. It is perhaps worth noting here–as a side issue–another widely under-appreciated truth: it is a not uncommon phenomenon in capitalist societies for self-made billionaires to eventually give away large parts of their fortunes to philanthropic causes. This is especially so in America, going all the way back to the ‘Robber Barons’. Another kind of power, you might say.

It is perfectly valid too, in democratic society, to question how much wealth inequality is too much and to propose redistributive tax policies accordingly. This is generally the most important implicit question at issue whenever the citizens of pluralist democracies go to the polls. But the zero sum fallacy of wealth distribution is not an argument; it is a delusion. Unfortunately, for people who are not used to thinking in macroeconomic terms, it is a delusion with a certain superficial plausibility and one that can chime with what they might want to believe. It can therefore be highly seductive. The Reagan/Thatcher years ushered in a thirty year period where any need to argue the merits of free market capitalism seemed superfluous. But things have changed; it has become a commonplace more recently to speculate on the rise of ‘millennial socialism’ amongst the young in Western society. The zero sum fallacy is one of socialism’s most seductive arguments and needs to be vigorously refuted.  

Graham Cunningham has contributed to The American Conservative, The New Criterion, City Journal and Spectator.au.