“What would happen if we banned billionaires?”
In 1916, John D. Rockefeller made his presence known in the annals of global finance, leaving a significant mark on the modern quantification of wealth. The Standard Oil Company’s monopolization of the American oil industry allowed him to attain an unprecedented wealth of 1 billion USD, subsequently making him the first official billionaire in human history (Beattie). The term “billionaire” refers to individuals with a net worth that is worth greater than or equal to 1 billion USD or pound sterling. In the realm of finance, becoming a billionaire is often regarded as the penultimate desiderata for businessmen, and in accordance with the stellar reputation of a billionaire, the means entrepreneurs have utilized to amass such wealth is derived from a wide array of methods, from strategic oligopolistic practices to the establishment of a profitable business in a competitive market (Yakowicz). The term “billionaire”, however, is also interpreted as a manifestation of growing fiscal inequality, as numerous economists express disquietude about the increased concentration of wealth in the hands of the ultra-wealthy. Oxfam’s research report, which reveals that billionaires hold more assets than the bottom 50% of the human population, accentuates the argument of said inequality (Lawson).
In the case of extreme financial phenomena, economists have a proclivity to explore hypothetical scenarios, in this case, a scenario exploring a more equal distribution of wealth (Baggini). In other words, delineating the implications if the world’s governments banned billionaires or prevented people from accumulating over 1 billion USD or pound sterling in liquefied assets. To summarize what this scenario may effectuate, the banning of billionaires would possibly reduce wealth inequality and shift values towards social responsibility, additionally causing trade offs such as slowed short term growth and risks of inefficient resource allocation, though some long term sustainable economic growth may result from redistribution of capital towards social sectors. To commence the analysis of this hypothetical situation, banning billionaires warrants an imminent transformation in the customary conventions revolving around the accumulation of wealth. Banning billionaires may possibly shift the capitalist mindset and focus towards community-oriented values, centralized on and defined by augmented social responsibilities. The cultivation of social trust from putting a wealth cap on billionaires can be justified by a 2019 study from the journal Social Science & Medicine, with their discovery outlining a negative correlation between rising inequality and “social trust”, a term signifying the trustworthiness of one’s relationship with another (Deng 215-228). Said shift away from individualism applies to business practices, with financial institutions placing emphasis on less volatile markets and ethical labor practices accompanied by a high level of economic transparency (Shaw).
The implementation of Marxist theory provides in-depth clarification of community-based societal change. Karl Marx suggests in his 1848 pamphlet The Communist Manifesto that the “The abolition of the bourgeoisie as a class means...the abolition of all class distinctions generally." Rephrasing his perspective, the abolition of the elite, hence the banning of billionaires. impels the destruction of differentiating people into classes. The specified loss of community-based beliefs such as transparency due to individualism is demonstrated in further detail by Marx’s manifesto, whose doctrine claims that the “bourgeoisie has put an end to all feudal, patriarchal, idyllic relations.”, compounded by the latter quote “has pitilessly torn asunder the motley feudal ties that bound man to his 'natural superiors,' and has left remaining no other nexus between man and man than naked self-interest”. The cynicalist views of the bourgeoisie that is by Marx viewed as a form of exploitation, justify how the abolition of billionaires shifts the prioritization of accumulating wealth to that of enforcing somewhat harmonizing values of social responsibility and more traditional beliefs (Kenton). Consequently, the redefined norm for success in such a situation would revolve around the successful conformation into more traditional beliefs. A world where at some point, a wealthy man would endeavor to perform in social practices in contrast to accumulating personal wealth, would be established.
Marxism suggests a framework as to how societal change would be enacted upon the banning of billionaires, and to simultaneously conclude and accentuate the argument, modern evidence already suggests the burgeoning emphasis on social responsibility among consumers, such as a 2018 study conducted by Accenture, where 62% of consumers requested companies to prioritize social and cultural values (“Accenture Report”). Banning billionaires, therefore, can be interpreted as a progressive act towards equity and societal justice (Baggini).
Moreover, delving into the topic of banning billionaires from a comparatively economic sense, perhaps the most pivotal aspect of the hypothetical scenario would be wealth redistribution. In regards to this, banning billionaires would elicit a prompt reduction in wealth inequality. This argument can be vindicated by the disruption banning billionaires will engender on the 80/20 rule, better known as Pareto’s principle. The “wealth concentration effect” first postulated in 1896 expounds on a cardinal aspect of any non-command economy, where the elite holds a considerably larger share of a nation’s wealth than the other classes combined (Brock). The original observation of the principle is that 80% of effects come from 20% of the causes. The disruption of the Pareto principle through the proscription of billionaires implies that the lower class would have access to more resources, alongside a noticeable shift in the social mobility of any given economy. Whether or not the lower class entirely benefits from this is subjective, however, as the economic distortion caused by centralized government planning would prevent optimization of government resource allocation (Schlueter). The same phenomenon occurs in social spending, where the World Bank released a study outlining that 30% of funds do not reach the lower class as a consequence of financial leaks and incorrect targeting ("Inequality and Shared Prosperity.").
Although the change does not necessitate a proliferative shift towards a communist system, the method of quantifying this progressive economic change is explicated by the Gini coefficient, the 0 to 1 scale which represents the norm for perfect equality and inequality respectively. The proscription of billionaires warrants a drastic decrease in the coefficient for income, especially more capitalist nations (Hayes). Utilizing Sweden as a case study, one can frame this hypothetical change similarly to how Marxist theory structures the previous argument of community-based change. The Scandinavian nation’s 0.09 decline in the gini coefficient across 51 years (1968-2019) coincided with a risky strategy employed by the Swedish government in the mid 20th century, where they introduced progressive taxation to redistribute outlying quantities of assets to the lower class of society ("Sweden Achieving Greater Equality”). Pareto’s principle in itself clarifies the slow redistribution of wealth possibly brought about by banning billionaires, constituting an enforced wealth distribution and portraying the banning of billionaires as a panacea for the stale growth in the lower class of the economy.
Furthermore, the multifaceted impact of banning billionaires can be traced back to the determinants of economic growth. The Solow Growth Model is a neoclassical take on the theory that the accumulation of capital is a sine qua non labor productivity and output ("Solow Growth Model."). The synonymous relationship between billionaires and large-scale investing means that the hindrance on physical capital accumulation, brought about by the prohibition of billionaires, would have the concomitant effect of a reduction in short term growth (Flanigan). In spite of this, sustainable long term growth is feasible by dint of the previously outlined disruption of the Pareto principle and the subsequent redistribution of investments in public goods. The wealth cap would, however, further short term negative returns with the additional possibility of diminished tax revenues. The destabilizing effect of accumulating capital would cause temporary fluctuations across multiple sectors of the economy (Pettinger). One could interpret the banning of billionaires as a Kaldor-Hicks improvement, with the simultaneous negative short-term economic growth and sustainable-long-term returns in the market ("Kaldor-Hicks efficiency.").
The ubiquitous entanglement of politics and corporate influence comes into play when discussing the banning of billionaires, which would essentially remove power and financial resources from corporate donors. The illegality of bribery is usually overlooked when it comes to corporate donations and access to lobbyism. Thomas Ferguson’s Investment Theory of Party Competition provides a rationale behind the frequent billionaire practice of funding campaigns and meddling in economic structural policies. Ferguson presents the notion that political outcomes are largely determined by the elitist interests. Additionally, undue influence has been another key aspect for the wealthy to interfere in the political process, who utilize lobbyists who exert their own representative influence to further the success of a certain political party (Dingwerth). The substantial power that lobbyism exerts over politics has been a central focus for many scholars, who notes that the recent polarization of the left and right have coincided with a dramatic increase in the popularity of lobbyism (Cumbers). Jeffrey Birnbaum elucidates his theory regarding the subtle establishment of a “lobbocracy”, accentuating the newfound position that lobbyism wields in configuring the democratic principles of any country into that akin of an oligarchy (Birnbaum).
Finally, the structural governance of major corporations would be heavily influenced by the banning of billionaires, granted that billionaires would forfeit their stakeholder power upon the seizing of assets (Chen). Martin Gilens and Benjamin Page’s 2014 study does counter this claim however, given that their research suggests wealthier groups representing businesses are often handed more authority than mass-based groups (Gilens 564-581).
The nexus between concentration of wealth and decision-making processes favoring the wealthy have been suggested by empirical evidence explicated by two studies. The first is a 2018 study by the Institute for New Economic Thinking, which scrutinizes the correlation between higher levels of CEO play and the paucity of democratic corporate governance (Bivens). Similarly, the second is a 2019 study by the Center for Economic and Policy Research, delineating a negative linear correlation between the CEO to worker pay ratios and employee representation on a given corporation’s board of directors (Lazonick). Despite the counterargument, substantial power may be redistributed to minority stakeholders.
To demonstrate the evincement of this argument, the stakeholder theory can be referenced, which posits that corporations should be accountable to all stakeholders who fund the company’s endeavors (Donaldson). The two principal bodies of evidence suggest that the banning of billionaires places greater emphasis on the stakeholder theory and the establishment of a decentralized governance culture. The exemplification of corporate holacracy is already utilized by Zappos, whose popularity has coincided with the meteoric ascent of their parent corporation, Amazon (Chafkin).
In summary, the banning of billionaires represents a departure from the contemporary market system. The prudence of such a radical policy would manifest in the form of the disruption of the Pareto principle, hence reduced inequality, as well as a shift towards community-oriented values partially aligned with the doctrines of Marx. On a political scale, it would catalyze the democratization of political parties. The complexities that accompany such hypothetical scenarios, however, would manifest in the form of complex economic trade offs, such as the decrease in financial short term growth, brought about by diminished tax revenue and the restriction of capital, as well as the possibility of inefficient resource allocation. Counterarguments to these trade-offs are valid, however, most notably the possible long term sustainable growth due to the redistribution of investments towards social sectors.
An ideal economic system from a Lockean point of view is one that balances individualistic rights with the needs of the community and the scarcity of goods (“John Locke”). In light of this, while the banning of billionaires may seem as a pragmatic solution to inequality, the difficulties involved are what makes this scenario a form of utopian speculation (Baggini). If the scenario was enacted, however, a definitive consequence of it would be to challenge producers to confront the newfound responsibility attained from putting a wealth cap on the affluent.
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