Every year, Forbes publishes its latest ‘rich list’ celebrating the world’s wealthiest billionaires. While some might roll their eyes at the seemingly endless riches accumulated by these individuals, others are filled with admiration, inspired by their innovation and ingenuity.
Whatever your reaction, the implications always go something like this: the richest 1% own almost half of the world’s wealth, while the poorest half of the population own less than 1%, and the divide is growing.
This is regarded as an inevitable trend that will continue ad infinitum, with an Oxfam report this year predicting the world’s first trillionaire within a decade – a prize that individuals such as Elon Musk and Jeff Bezos are no doubt eyeing with a razor-sharp focus.
However, there are many environmental, moral, economic and practical reasons for breaking this monotonous cycle of growing wealth inequality, and almost as many reasons why politicians dare not address them.
To fall within the wealthiest top 1% in the US, Forbes data shows that you would need a minimum net worth of $10.4m – remember, this is the minimum amount, with the top 10 richest people (all men) worth between $95bn and $240bn.
Although the threshold is lower in the UK, at around $2.7m, only 685,500 Britons have passed this minimum limit, who together hold more wealth than 70% of the population, according to Oxfam.
The charity estimates that an annual wealth tax of up to 5% on the world’s multimillionaires and billionaires could raise $1.7trn a year, enough to lift two billion people out of poverty, fully fund the shortfalls on existing humanitarian appeals, deliver a 10-year plan to end hunger, support poorer countries being ravaged by climate impacts, and deliver universal healthcare and social protection for everyone living in low- and lower middle-income countries.
“The more work I’ve done on the super-rich, the more I’ve felt that a lot of society’s problems could be solved by achieving a more even balance of income and wealth, and that the associated economic risks are wildly exaggerated,” explains Luke Hildyard, author and director of the High Pay Centre.
“If anything, I think it’s likely that greater equality would mean more economic growth; we’d have a bigger pie shared more equally and generally much higher living standards if wealth was more evenly distributed.”
However, the strongest argument for narrowing the divide between the richest and poorest might be that we could all live within the boundaries of environmental sustainability.
The most comprehensive study of global climate inequality found last year that the richest 1% is responsible for more carbon emissions than the poorest 66%, and accounted for 16% of all CO2 emissions in 2019 – enough to cause more than a million excess heat-related deaths.
“Generally speaking, a person’s affluence is the best predictor of how polluting their lifestyle will be,” author Ingrid Robeyns writes in her new book, Limitarianism: The Case Against Extreme Wealth. “Rich people have larger homes, travel more, use less public transport and have investments in polluting industries.
"In the case of the super-rich, we are looking at huge mansions and second homes, multiple cars, private jets and capital accumulation from profits in industries that contribute to climate change.”
Conversely, it is the poorest among the global population who are most affected by the effects of climate change and extreme weather as they struggle to recover from failed harvests, destroyed homes and health crises.
“There’s a historical carbon debt, as around 80% of emissions came from today’s advanced economies between 1850 and 2011,” says Jayati Ghosh, professor of economics at the University of Massachusetts Amherst.
“But I don’t think of it in terms of ‘the West’, because there is a lot of inequality within populations. There’s a broader issue of lifestyle and aspirational tendencies that exist all over the world, where everyone is aspiring to a material existence that is simply not sustainable.”
In his latest book, Enough: Why It’s Time to Abolish the Super-Rich, Hildyard proposes a series of tax reforms to narrow the divide. However, these are not necessarily the most effective measures that can be taken.
Rather than just focusing on redistribution of wealth, the book also outlines how ‘pre-distribution’ can play an equally significant role in preventing such abundance of riches being accumulated by so few people in the first place.
This could be achieved via: corporate governance reforms to redirect returns from investors and towards workers; stronger trade unions to empower employees in pay negotiations; and compulsory worker ownership and profit-sharing mechanisms to channel corporate wealth to those who create it.
Hildyard tells me: “You could also have a maximum limit on what people are paid at an organisation according to a ratio, rather than a fixed amount, so they can’t be paid more than 10 times the lowest amount a colleague is paid, for example.”
Others propose a more radical approach, with Robeyns suggesting that we should aim to create a society in which no one has more than €10m.
“This figure, whether in euros or dollars or pounds, roughly holds for most developed economies, though it is important to note that, more than the specific amount, the method for calculating it is what matters,” she writes.
Radically capping lifetime inheritances and gifts are also among her proposals, although this is a highly emotive topic, and would have to be done on a case-by-case basis to be justified morally.
It is often said that billionaires will flee their home countries should greater restrictions on their wealth be introduced. Further investigation of this assertion suggests quite the opposite.
Studies have shown that migration levels among high earners are relatively low, largely because they are no longer searching for economic success. Indeed, analysis of the Forbes billionaire list previously found that around 84% still lived in their country of birth, and of those who lived abroad, most had moved residence long before they became wealthy.
“People almost never move when they are at the advanced career stage – a time when they are most likely to face a millionaire tax,” sociologist Cristobal Young writes in his book, The Myth of Millionaire Tax Flight.
“At the peak of their careers, people have family responsibilities – spouses and children who may be opposed to moving. They also have a lot of business and social contacts that make them prominent, well connected insiders where they live.”
There are obvious exceptions to this – Sir Richard Branson moved to the British Virgin Islands after becoming a billionaire – but in general, higher taxes are unlikely to lead to a mass exodus of the super-rich. In fact, higher taxes would theoretically pay for the better parks, roads, bridges and other amenities that wealthy people enjoy.
In any case, there are mechanisms that could be put in place to prevent a race to the bottom and stop billionaires fleeing to tax havens.
Hildyard cites proposals for an ‘exit tax’ on billionaire emigrants, such as a capital gains tax which effectively treats them as if they have sold their assets at the point of emigration, thus removing the incentive to do so.
“It’s also important to point out that the super-rich accumulating vastly disproportionate amounts of wealth and income is a common problem for countries all across the world,” he says. “There’s a case for all nations to come to an agreement on wealth in the same way they did with the Montreal Protocol or recent agreements on corporation tax.”
As we enter the age of the trillionaire, it is worthwhile reflecting on why anyone would want to acquire such wealth in the first place. There is very little that a trillionaire could do that a billionaire or multimillionaire couldn’t, and studies have shown that our happiness plateaus after a certain wealth threshold.
The answer could be simple: power. “Economic power gives you political power, and they use it to change policy, legislation and regulation,” Ghosh says.
Might the reason why so few politicians speak out about restricting the wealth of the top 1% be that their hands are tied, and that the super-rich are in fact dictating policy from behind the scenes?
Rather than entertain conspiratorial thinking, the primary reason why politicians do not address the elephant in the room could be a far simpler one: proposals to tackle wealth inequality are just not that popular.
“I’ve been involved in focus groups with people on attitudes towards the super-rich, and I’ve seen a lot of polling on the topic, and there doesn’t seem to be much public appetite for it,” Hildyard says. “It needs to be emphasised that the levels of wealth being targeted would be way beyond ordinary people who have been reasonably successful."
Rather than confront the compelling reasons for tackling wealth inequality, and explain them clearly to the public, it is far easier for short-sighted politicians to ignore them altogether.
“Abolishing the super-rich doesn’t have to be revolutionary or anti-capitalist,” Hildyard says.
“Norway and Denmark are capitalist countries, but they’re quite different to America. There are many distinct types of capitalism, and using the excess incomes and wealth of the super-rich to benefit society instead is a pragmatic, evidence-led conclusion to reach, regardless of political ideology.”
As long as these misconceptions prevail in the minds of the public at large, we will continue to see the annual updates from Forbes on the burgeoning bank balances of the super-rich and the escalating wealth divide.
However, there can be a fairer, greener and more prosperous alternative for society and everyone in it, even if it seems a long way off. As Robeyns writes in her book: “Limitarianism doesn’t come with a silver bullet or a single policy that would solve everything. It can best be understood as a regulative ideal – an outcome to strive for, but which is unlikely to be definitively achieved, given the way in which the world is currently organised.
“Acknowledging that eliminating poverty and ending discrimination are regulative ideals doesn’t make them any less important. The same holds true for limiting individual wealth."
Limitarianism: The Case Against Extreme Wealth, can be ordered here: Limitarianism (penguin.co.uk)
Enough: Why It's Time to Abolish the Super-Rich, can be ordered here: Enough (plutobooks.com)
The Myth of Millionaire Tax Flight, can be ordered here: The Myth of Millionaire Tax Flight: How Place Still Matters ... (sup.org)
Image credit: Neil Webb
Chris Seekings is the Deputy Editor of IEMA’s Transform magazine, which is published biomonthly for IEMA members. Chris’s role involves writing sustainability-related news, features and interviews, as well as helping to plan and manage the magazine’s other day-to-day activities.