During the last two years, millions of Americans have seen their livelihoods and lives upended as a global pandemic has decreased life expectancy, shuttered businesses and schools, added to unemployment, and devastated communities. But one group has been doing quite well: billionaires. The world’s 10 richest men doubled their fortunes from $700 billion to $1.5 trillion, according to a report by Oxfam International. Over the same period, more than 160 million people around the world have been pushed into poverty.
It’s hard not to feel moral revulsion when gigantic wealth is displayed as extreme poverty and human suffering afflict the globe. But why exactly does this inequality matter? Why not simply focus on ending poverty and leave the rich to their yachts and spaceships?
In “Davos Man: How the Billionaires Devoured the World,” Peter S. Goodman delivers a powerful and resounding answer: Outsize wealth is an outsize threat to democracy. Focusing on a handful of billionaire entrepreneurs — Jeff Bezos, Stephen Schwarzman, Marc Benioff, Jamie Dimon and Larry Fink — Goodman, a New York Times economics correspondent, shows how they helped reshape an economy that now works only for the wealthy. (Bezos owns The Washington Post.) Over the last several decades, the rich have clamped down on wages, unions and taxes, building enormous monopolies with expansive political power. Their fortunes have grown while the majority of the U.S. population has faced stagnation or even a decline in living standards. Public frustration over this state of affairs has turned parts of the public in an anti-democratic and hyper-nationalist direction.
ProPublica, the nonprofit investigative news organization, obtained IRS records showing that Tesla founder Elon Musk, the second-richest person in the world, paid no federal income taxes in 2018. The very rich often hold their stocks and shares in ways that draw no tax: As Warren Buffett observed, billionaires now pay lower tax rates than their secretaries. And it is not as if they are paying much in corporate taxes, either. By sending profits abroad, companies like Facebook, Amazon and Google have paid little or no U.S. corporate tax. Recently, the leaked Pandora Papers cast further light on the tax havens, shell companies, complex trusts and other tax loopholes used by the super-rich. The wealthy also have an army of professional lobbyists, lawyers and accountants looking for loopholes in the tax code and shaping the rules where they can.
This influence extends beyond the economy: The children of the elite are disproportionately represented at America’s most selective colleges and universities, the top 1 percent have access to teams of expensive lawyers in the face of criminal charges, and they wield outsize influence in elections through political contributions and lobbying. The rules that are meant to restrict the power of money in the markets, the political system, the regulatory system and education can all be gamed by the wealthy.
Certainly, many of these billionaires are innovators: It’s hard not to be impressed by the business genius of a Jeff Bezos or an Elon Musk. But after innovation mints new billionaires, what should happen next? There is substantial agreement among economists and social scientists that massively successful innovators need to be prevented from blocking the next wave of innovation, which often threatens their dominance.
Goodman’s reporting is biting and bitterly funny as he shows just how much the wealthy wish to be admired. His five billionaires are “Davos” men, showing up at the World Economic Forum each year in the Swiss Alps, determined to demonstrate their commitment to the common good. As likely to reference Nelson Mandela as Milton Friedman, and to begin their mornings with meditation sessions, these Davos men tout their giving to charity and their commitments to “stakeholder capitalism.” Unacknowledged, as Goodman wryly notes, are their decades of tax avoidance that weakens state capacity, their roles in the gutting of antitrust laws, their lobbying for tax cuts, their reckless financial gambling with pension funds, their predatory privatization of public services and their opposition to unions.
So, what is to be done? Goodman homes in on one policy solution: taxes, and in particular, a wealth tax. Economists Emmanuel Saez and Gabriel Zucman estimate that a marginal tax rate of 10 percent for wealth over $1 billion would have raised $250 billion from the 400 richest Americans in 2018. Perhaps as important, it would have deconcentrated wealth. Given the analysis above, a wealth tax is certainly a policy worth considering. So is raising the income tax on high incomes. Even if you don’t like paying taxes, you should want the tax system to be fair. And we should not forget that the unpaid taxes by the super-rich mean more decaying roads, less money for schools and more uncared-for children.
But would it solve all the problems that ail our democracy? Goodman’s analysis would be strengthened by looking at other factors that contribute to the erosion of democracy: the persistence of de facto segregation, unequal opportunity and misinformation. While the billionaires may have had a hand in this, it is not they alone — and tax policy alone will not fix it. We also need to consider policies to raise voter turnout and increase the representation of disadvantaged groups, policies that encourage unions and the use of wage boards to rein in monopsony power, policies to end the restrictive zoning that aims to keep poor people out of wealthier communities. We need to significantly boost investment in pre-K and K-12 education, regulate the Internet, and develop a national jobs policy aimed at reducing unemployment. Goodman keeps his focus on billionaires and says little about alternative explanations for inequality, such as the effects of technology and globalization. Again, Davos Man has certainly had an outsize influence on these factors, but do we know how much inequality would have happened without him?
Balzac reportedly said that behind every great fortune is a great crime. That is, at best, an exaggeration. But “Davos Man” shows us that today’s extreme wealth is inextricably linked to a great crime, perhaps the greatest one of this century: the hijacking of our democracy.
Debra Satz is the Marta Sutton Weeks professor of philosophy at Stanford University.
How the Billionaires Devoured the World
By Peter S. Goodman
Custom House. 472 pp. $29.99