Rise of a Nation of Billionaires

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Money is a little bit different for a billionaire. Compared to an average american, a trip on a yacht is like a subway ride. A sports car is like a toy car. And a private island is like buying a home (Business Insider). Billionaires aren’t the 1%, they’re the .0001%. They can make a call and meet with a world leader. Many of them are world leaders. Billionaires are booming. In 1987, there were an estimated 140 billionaires. In 2019 there are fifteen times as many billionaires, with almost thirty times more wealth, totalling almost 9 trillion dollars. “If today’s billionaires formed a country, it would be the eighth wealthiest country in the world” (BusinessInsider). They have become a symbol of inequality in a rigged system, fueling protests around the world. A lot of billionaires made their fortunes by inventing things that changed our lives. Some more so than others. So why are there more billionaires than ever? And are they good or bad for the world?

In September 1982, Forbes 400 was released, the first billionaire ranking in the world. It is very hard to track down wealth, so they looked to places like Texas where you had the huge oil fortunes, Silicon Valley, where tech was getting a lot of attention. And then in New York City on Wall Street. On that wealth ranking, there were 11 heirs of John D. Rockefeller. He lived in the late 1800s in the United States, an era called the Gilded Age, which saw the world’s first ever self-made billionaires. In today’s dollars, Rockefeller is estimated to be twice as wealthy as the wealthiest person in the world today. This age was characterized not only by the astounding wealth, but massive corruption. Mark Twain coined the term Gilded Age, because while wealth was glittering on the surface, it was rotten underneath. Individuals like Rockefeller got rich from their political connections, consolidating industries into trusts and exploiting workers, and they were barely taxed. Before this time wealth is hard to compare, but to be extremely wealthy you probably controlled an Empire, like Augustus Cesar in Rome. But the Gilded Age tycoons made their money a different way. They founded successful companies. Continental scale economy in the United States and the rise of major corporations caused the massive surge of wealth. Vanderbilts railroads formed more than 200,000 miles of new track that connected the continent for the first time, helping the U.S. turn into an economic superpower.

Billionaires are booming today because of an increasingly global-scale economy, which has helped the whole world get wealthier. “On a global level, inequality has been declining. This is mainly driven by the fact that some of the poor countries are growing fast” (Business Insider). In the last few decades, no country has grown as much as China. Roughly 50 years ago the majority of China was in extreme poverty. As the communist country went through what is called socialist modernization, extreme poverty has virtually diminished. Before 1978 there were no billionaires in China, they now have the second most after the U.S. It is a very similar situation in India, who now have over 100 billionaires (NY Times).

In the white collar world there is something called ‘winner takes all’, which is the case for mobile tech industries, consisting of over half of the mega billionaires (30 billion plus). Digital products like websites or apps that don’t take much manpower to build can instantly reach a global market, making them the most profitable sources of income. Google’s founders for instance, are the 10th and 14th wealthiest people in the world. Facebook’s founder is the eighth wealthiest person in the world. Almost 50% of all U.S. shopping happens on Amazon. In 2019 Amazon’s CEO, Jeff Bezos became the wealthiest person in the world (Guardian).

Celebrity billionaires like Oprah, Kylie Jenner and Michael Jordan are low in the billionaire rankings, and none of them are on the list for the work that first made them famous. Michael Jordan made 90 million dollars playing basketball, but his corporate partnerships made him almost one billion dollars. He became a millionaire through his labor, but became a billionaire through his capital. Capital is anything you own that can make you money. A home, stocks, patents and copyrights are all examples of capital. Most people make their money through labor, but the richer you are the less your income comes from labor and the more it comes from capital. The .0001% are an exceptional example of this. Once you have capital, it just grows. Money Makes money. “To turn 100 dollars to 110 dollars is work, but to turn 100 million to 110 million is inevitable”, Edgar Bronfman Sr. Heir to the Seagrams fortune. That’s because if you only have 100 dollars in savings it’s hard to spend and it’s hard to invest. But 100 million dollars turns to 110 million dollars if you let it sit in the stock market for an average year without lifting a finger. After a couple generations you find yourself with a dynasty.

At least two hundred millionaires have signed the Giving Pledge, vowing to give away at least half of their wealth. And they’re doing things that governments traditionally do like fighting infectious diseases, funding the construction of Olympic facilities, ensuring college is affordable, or repairing critical infrastructure like Elon Musk pledged he would make clean drinking water available to everyone during the Flint Water Crisis. There is controversy surrounding the wealthy’s involvement because, “you do not want our citizens to be at the mercy of private unaccountable individuals who might or might not fix the problems that you have with your infrastructure, governments & basic human rights’, Abigail Disney, Granddaughter of Roy Disney. Governments raise money for these public services through taxes, but in most wealthy countries individuals labor income is taxed higher than their capital income. Yet even if a country increases its taxes on the wealthy, in a globalized world that is hard to enforce. Offshore financial systems give the wealthy the opportunity to avoid income taxes, corporate taxes, inheritance taxes and hide assets from creditors. The world got a glimpse of this system in 2019 when people crunched the numbers when an analysis of Scandinavian countries found out that on average most people avoid paying 5% or less of their taxes. The wealthiest .01% dont pay about 25%. In total the equivalent of 10% of the world GDP was stashed in offshore bank accounts, trillions of dollars. In Russia the .01% stashed more than half of their wealth in offshore accounts. A Lot of missing tax revenue for public services (PBS).

With expert help, billionaires can pick and choose the laws of whatever country they like. “Globalization has opened up all sorts of addresses to hide the money”, Jeffery Sachs, economist. New York City is home to the most billionaires in the world. Apartments worth tens of millions of dollars making New York part of that global ecosystem of hiding wealth from the law, laundering money and doing all sorts of things that push the edges of legality. With an LLC, the owners of these properties are left anonymous, making it virtually impossible for someone to determine who the ultimate owner is (NY Times). This is one reason why it can be so difficult to track down where all the billionaires are, or how many there are, or how many billions they have. Governments don’t track wealth on a global scale, so rankings like forbes are the best source we have, and their not reliable. These lists are based on publicly available information. Most billionaire wealth is private. Billionaires may not even know how much money they have. “Once you buy an asset that isn’t publicly traded, it’s really whatever you want to value it at”, Mark Cuban. Forbes recognizes that it underestimates the amount of wealth in the world.

Back in the Gilded Age, billionaires didn’t just give away their money. The government stepped in. The Progressive Era began a new way of regulation, breaking up the major trusts like standard oil. Teddy Roosevelt was famously called the ‘trust buster’ for this. In a globalized world, reigning for wealth looks a little different. The European Union has put tax havens on a blacklist. But the results remain unseen. And in the U.S. politicians have started pushing for much higher taxes on the wealthy, which a majority of Americans agree with, including some billionaires. “The taxation system has tilted towards the rich and away from the middle class. And I think it should be addressed”, Warren Buffett. Our relationship to billionaires is complicated. We’ve made them celebrities if they weren’t already. We’ve made them powerful, and they do some incredible things with their money. Sometimes more efficiently than governments. “It’s not the individuals i’m worried about, it’s the system which allows this kind of massive income and wealth inequality”, Sen. Bernie Sanders. That nation of billionaires might soon be the richest in the world. And while their money might not live in one country, well all live in theirs.

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