PHM-Exch> Billionaires Beware

[Claudio Schuftan]

From: Jomo <jomoks at yahoo.com>


*Billionaires Beware*

*Jomo Kwame Sundaram, Anis Chowdhury*

SYDNEY and KUALA LUMPUR, Jan 07 (IPS)  - The latest November 2019 UBS/PwC
Billionaires Report counted 2,101 billionaires globally, or 589 more than
five years before. Earlier, Farhad Manjoo had seriously recommended,
‘Abolish Billionaires', presenting a moral case against the super-rich as
they have and get far, far more than what they might reasonably claim to
deserve.

Manjoo also argues that unless billionaires' economic and political power
is cut, and their legitimacy cast in doubt, they will continue to abuse
power to further augment their fortunes and influence, in ways detrimental
to the economic, social and public good.

Benign billionaires?
In defence of billionaires, Josef Stadler, head of ultra-high net worth at
UBS Global Wealth Management, argued that their wealth "has also translated
into their philanthropy, as billionaires seek new ways to engineer
far-reaching environmental and social change."

Philanthropic ethics expert Chiara Cordelli notes that philanthropy and
donations have diverted social responsibility from governments, and created
other problems by bypassing democratic political processes and
accountability. "The philanthropist should not get to decide – in virtue of
her or his disproportionate influence – which world we should live in".

An ostensibly benign ‘billionaire effect' cannot offset the adverse impacts
of billionaires' wealth accumulation, tax avoidance and abuse of power to
corrupt political processes and policy making. Rather, ‘every billionaire
should be regarded as a policy failure'. To create fairer societies, we
need to end extreme wealth concentration and its problematic consequences.

Dubious sources
Robert Reich has shown that a significant share of billionaires' wealth is
undeserved and does not bear any reasonable connection to their ability,
intelligence or contribution, as expected in a society supposedly based on
meritocracy and fair competition.

Oxfam estimates that about a third of billionaire wealth is inherited.
There is no real economic case for inherited wealth as it undermines social
mobility, economic progress and meritocracy, the main basis of legitimation
in modern society.

Other work finds that about 43 per cent of billionaire wealth comes from
crony connections to governments and monopolies, e.g., when billionaires
use such connections and corruption to secure government concessions and
contracts.

In developing countries, this share was even higher, 56 per cent, according
to a 2015 Oxfam study. The Economist's crony capitalism index also suggests
that corruption and crony connections to governments are behind much
billionaire wealth.

Another source of billionaire wealth is abuse of monopoly privileges
granted by patent laws. While intellectual property has been justified as
necessary for innovation, recent research, summarized by the The Economist,
disputes the supposed link between patent rights and innovation, and deems
the patent system a dysfunctional way to reward innovation or new ideas.

Since the 1980s, patent rights have been extended well beyond what may be
considered necessary to incentivize innovation. For Richard Posner, a
respected US judge, "such extensions offer almost no incentive for creating
additional intellectual property".

Insider trading – taking advantage of privileged information not yet made
public – has been significantly abused for ‘unfair' advantage in markets.
The New York Times has found, "Some of the most prominent cases of illegal
insider dealings have involved very wealthy people".

Growing wealth concentration
A large and growing share of the global economy is controlled by a few
large transnational corporations (TNCs). Decades of mergers, acquisitions
and ineffectual anti-trust legislation have seen market power concentrated
despite claims to the contrary.

Such TNCs, cartels, other monopolies and oligopolies extract lucrative
rents, enabling them to secure super-profits, accelerating wealth
accumulation and concentration at the expense of petty producers, workers
and consumers.

The way wealth is used by the super-rich confirms their own ‘social
disutility'. They accumulate more quickly by paying as little tax as
possible, making good use of tax advisers and havens. A study found that
the super-rich pay as much as 30% less tax than they should, denying
governments billions in lost tax revenue.

The extremely wealthy also get the best investment and tax evasion advice,
enabling billionaire wealth to increase by an average of 11% annually since
2009, far more than average investors and ordinary savers get.

‘Dark money' corrupts societies
The secretive Society of Trust and Estate Practitioners (STEP),
representing over 20,000 wealth managers, has successfully lobbied many
governments to reduce taxes on the richest. STEP has spent billions to
‘buy' legal impunity, politicians and the media to lower taxes on its
clientele. Such lobbying has accelerated wealth concentration and
accumulation.

Such ‘dark' money is used to influence elections and public policy the
world over. An Oxfam study has shown how politicians have been ‘bought' by
Latin America's super-rich, e.g., with substantial financial backing for
ethno-populist, racist and religiously intolerant leaders.

Over a century ago, monopoly power was seen as a major threat to the US
economy and society. Anti-trust legislation and action, especially by
President Theodore Roosevelt, broke up cartels and monopolies. Years later,
his cousin, President Franklin Delano Roosevelt warned, "government by
organized money is just as dangerous as government by organised mob".

Neoliberalism "oversold"
However, in recent decades, neoliberal economists have taken a much more
benign view of oligopolies and monopolies, distinguishing them from
classical liberal economists committed to market competition.

Conversely, insisting on competition in small developing economies has
effectively prevented domestic firms from becoming internationally
competitive by building on economies of scale and scope.

Significantly, even the International Monetary Fund, which imposed
neoliberal policies for nearly four decades as a condition for credit
support, now accepts that neoliberalism was "oversold", while the World
Bank acknowledges disappointing growth after neoliberal reform.

Deregulation, liberalization, privatization and globalization have
strengthened the market power of corporations, reduced the progressivity of
tax systems, reduced public provisioning, increased the frequency and
intensity of financial crises, and slowed growth and development.


Visit this story at http://ipsnews.net/2020/01/billionaires-beware
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