Extreme wealth – How much is too much? A new measure for better economies, democracies and societies
•
Article summary
Notes from the Civil Society Policy Forum on 15 October titled Extreme wealth – How much is too much? A new measure for better economies, democracies and societies. The World Bank made history recently by setting its first ever goal to end high inequality in countries. Boosting the accurate measurement of inequality, of both income and wealth is vital to this effort. Recent research has pointed to the idea of an ‘extreme wealth line’ potentially mirroring the extreme poverty line defined by the World Bank, which galvanized the global fight against extreme poverty. Is such a line necessary at the top too, and if so, where should it be set?
Moderator
- Kate Donald, Head of Office, Oxfam International DC
Panelists
- Abigail Disney, Film Producer and Philanthropist, Patriotic Millionaires
- Fernanda Balata, Political Economist, New Economics Foundation
- Nora Lustig, Director, Commitment to Equity Institute, Tulane University
A recording from this session can be found online here.
Kate: At Oxfam, we do believe there is such a thing as too much wealth. The ten richest men in the world own more than the bottom 1 per cent. We hear a lot about scarcity, resources aren’t available, there’s not enough money etc. But these conversations about wealth show us the money is there, it’s just concentrated in a few hands. We often focus on what good could the money do, but let’s focus on the damage that it’s actually doing existing in an extremely concentrated way. Some progress: the new G20 committee on inequality, the new indicator in the corporate scorecard on inequality. Abigail, why are you involved in Patriotic Millionaires?
Abigail: I joined Patriotic Millionaires as soon as I heard of them. I have always been called a traitor. It seemed the economic system was on a road to hell. Most of the time I’m too polite for saying “I told you so”, but I will give a few today. I grew up in a family of wealth, who decided to turn it into more wealth. It’s bad for the world, and for the people who own it. It is painful, sole crushing, alienating, and morally corrosive. I have witnessed it myself, but don’t assume because it’s personal it’s not serious. The personal nature is what should concern us about the effect of wealth. It’s about wealthy families and inheriting and hoarding wealth. How quickly people can lose their bearings when they have wealth. It starts with empathy. It took me years to wonder how much sleep our housekeeper was getting. Did she wish she had a whole weekend? For all the lessons of kindness we were taught as children, this slipped under our nose. Soon empathy gives way to sympathy.
It makes you comfortable with the idea there’s nothing wrong with the difference between you and other hard working people. What often comes along with a wealthy life is terrible isolation. I was told not to trust anyone. Over the past few decades I’ve watched the 1 per cent create more exclusive spaces, more than anything to prevent themselves from having to come face to face with the real world. But there is so much alienation in those spaces, the people ‘out there’ do indeed feel far away and you feel different to everyone else. The self-segregation the wealthy build is a consequence of a problematic tendency. How easily does the idea of ‘other’ transmodify to being ‘special’. In the world of being special, your wants become mistaken for needs. The real needs of those ‘out there’ become less important. You find yourself surrounded mainly by people who serve you. People will not tell the truth about things that risk their lifestyle. They will say the only good money is more money. If you want to give, start a foundation and don’t touch the corpus. If you want children, you must leave them better off. More money can certainly look like more value.
There are Peter Thiel’s warnings about the anti-christ, Sam Altman’s wish that instead of talking about socialism, we could talk about everyone being as rich as he is, Elon Musk’s wish that we could put empathy in the rear view mirror – these examples go on and on. These men are welcome to their self-revelations, their insecurity. What they’re not welcome to is the keys to our democracy. It starts with finding a way to get money out of politics.
Fernanda: I think it’s important we started this with a story and not just data. I’ve been working on inequalities for more than ten years. I see the WBG’s new inequality indicator as a welcome signal that the Bank takes inequality seriously, but things will remain ineffective if they keep missing a crucial diagnosis. Inequality indicators help us know the disparity between the haves and have nots, but don’t tell us what is causing it, where the harms originate, or how they spread. The Gini Coefficient that this high inequality indicator is based on summarises the uneven distribution of income and consumption. It doesn’t capture concentration at the very top, and does not measure wealth concentration or top end power. It’s not just unequal outcomes, they are inequities and therefore not inevitable. We are talking about the concentration of power within structures, that reshapes economies, democracies and climate outcomes we all have to live with. This is a structural issue that is enabled by norms and rules: capital profit, driven investment, creditor above debtor priority, GDP growth as the priority. Our legal and democratic systems have normalised this.
So, when I speak about extreme wealth, I mean the inequitable and unsustainable accumulation and concentration of control that shapes rules, by elites. What does the evidence tell us? Since 2020, the five richest men have more than doubled their wealth. This concentration causes great damage: let’s get away from ‘risks’ and talk about ‘harm’. It has driven inflation, housing unaffordability and homelessness, it distorts democracy through political donations, lobbying and media capture. In the UK, just 3 firms control around 90 per cent of national newspapers. When you control those media channels, their influence delegitimises political projects that challenge that elite power. Portfolios of the mega rich are tied to fossil fuels and speculative finance, which influences public investments and priorities. Fossil fuel subsidies were $7 trillion in 2022. This is evidence of the political economy in concentrated wealth, which we then see in budgets.
Cross border tax abuse drains about $492 billion per year that could fund public services. Tax systems are still designed to tax people who rely on work to earn money, or consume everyday items, the tax system enables avoidance by the ultra rich. Since the mid 90s, the role of wages and long term employment in the economy has been eroding, yet our systems are still designed around that. The share of income and labour as the economy has reduced. Instead of work providing financial security, it now relies on asset ownership. Much of it is inherited, and increasingly detached from effort and achievement.
Why will inequality metrics alone not get us there? Research shows us that, beyond a certain point, private wealth works like a veto power. Over policy space and ecological limits. Managing results with just the Gini indicator drives results that are bottom up, and do not include things like monopoly rent, asset inflation, offshore secrecy and political capture. That’s why some countries can look better on inequality while the top 0.1 per cent remain ungoverned. Through the Extreme Wealth Line, it’s to name extreme wealth as a source of harm so we can govern it, and follow the cascading effects.
The Wealth Line is not a limit, a cap, a tax, or a policy. It’s a governance tool with a set of metrics to indicate the point where wealth becomes extractive and harmful to society. If poverty lines have been useful in giving a benchmark on the minimum income needed, the wealthline helps us see the harm of wealth. Building wealth visibility into the metrics: asset registries, top tier concentration, spillover indicators, emissions by wealth percentile. It compliments the Gini aspect. Aligning the line with regulatory and tax systems: guiding progressive taxations, regulating harmful asset classes, monopoly rules, etc. We need policy coherence, not just revenue raising policies. Finally, accountability, governments and NGOs can establish independent mechanisms to track extreme wealth
The Bank’s indicator family still lacks this tool to look at extreme wealth. Asset bubbles remain invisible in poverty action. We are looking towards the first trillionaires very soon. Today, extreme wealth is still admired and managed privately. It weakens democratic institutions.
Nora: I co-chair the UN High Level Group on Beyond GDP – I will use this as part of the consultation process. I will make a brief presentation along four lines: is there excessive wealth and why? What does it mean for measurement, for policy, and for advocacy? My answer is yes, there is excessive wealth. Some excessive wealth arises from pillage and exploitation. Some people are wealthy just because they inherited it. It is a result in some cases of controlling the policy realm that allows you to capture rents. Finally, even if wealth was created through a competitive market, excessive wealth has implications that are dysfunctional. Particularly what happens now with political processes. This is perhaps the most compelling reason for me. The concentration of wealth also happens in industrial structure: concentration of power and wealth in companies. We need to look at both as problematic. A simple reason why we have to accept that there is excessive wealth, is the coexistence of excessive consumption alongside stark poverty.
It would be useful to have indicators of wealth as well, by the World Bank. I don’t agree that there’s no study of the causes of inequality, there is a lot of work done by the WBG and beyond to see the drivers and consequences. The Bank is doing a lot of Commitment to Equity (CEQ), we have a methodology. The WBG is coordinating a project on measuring wealth concentration. There is a wealth data lab. That information might make it to the menu of indicators used by the Bank.
What about policy? Fiscal policy is one of the key instruments to address wealth, and income inequality. I tend to see only an emphasis on the tax side, you should also look at the spending side. You could tax the rich enormously and use it to buy weapons. How would that help poverty reduction? You want to review both tax and spending in your system. The other dimension important to policy is what to do with the economic concentration, that is usually to do with regulatory frameworks that may be lax. In the US, there is a very scary concentration of power in the healthcare sector, which means the US could have the best healthcare in the world but doesn’t.
For fiscal policy, you want a gradual process. You want to have a continuum rather than a specific line for tax. What I think the advocacy community should do: transparency and information – making accessible information in countries on taxes. It can be shared in an anonymous way. You would then have power to influence policy processes, deliberations in congress, etc – you can highlight what is happening. Usually we are discussing fiscal reforms without knowing. I would also emphasise bringing awareness of coexistence of extreme wealth with stark poverty. That is what mobilises. Advocacy should also bring opportunities to have allies.
Questions and answers:
Executive director of a CSO in Uganda: Despite everything, we shouldn’t allow extremely rich people access to democracy. Could it be plausible to say, if you are rich of a certain category, you shouldn’t have access to public office?
Cat, Centre for Global, Senior Programme Manager: Is extreme wealth a symptom of systems? Or are systems designed to maintain extreme wealth? Perhaps the response should be not just corrective, but also transformative. Can we redistribute within that system, if it’s designed to produce that inequality?
Rodolfo, Latindaad: Do you consider public debt as an element related to the concentration of wealth? Today, the public debt is increasing, but the wealth is related to financial sectors. Many countries have to pay private holders of debt.
Tawfiq, Strength and Diversity Initiative Nigeria: This topic addresses my own reality. Private wealth emasculates democratic values, it also creates ethical problems. It cascades to the levels of being oppressive. It’s not just about money, but about spending. In Nigeria, parties, luxury, big cars. People who are struggling, they kill those who are rich, people then don’t see value in work, wanting to get money at all costs because they will then feel a sense of value. This is an issue of the African context due to the levels of extreme poverty.
Nora: Cat, essentially you’re asking if it’s possible to have an inclusive and equitable society under capitalism. Alternative to proletarian revolution? More seriously, we have to reflect. Alternatives did not work out. It’s a big debate between the radicals and reformists. What is achievable and how can the rich contribute?
Abigail: In the history of the US, we’ve had many moments like this. But always, great wealth has been associated with enormous cruelty. Rich people who felt it was their right to have slaves. Their version of wealth couldn’t exist without cruelty. Times in history with economic booms, they were happening with moments of violence against, for example, people of colour. Can wealth be accumulated without human rights violations? I’m not sure it can. I think there should be a public reckoning around the cost of wealth accumulation to structures of society. As education and entertainment platforms have proliferated, more and more people are viewing things that show people living on a lot of money. There’s a real struggle, among people on low income especially in the United States, a lot of consumption that doesn’t make sense, because it makes them seem more valuable or more important. In the past 40 years or so, lining up with Margaret Thatcher and Ronald Reagan – to change the narrative that we shared where one that says everyone is in it for themselves, if you don’t climb to the top it’s your fault. There used to be at least some element of collectivity. It must be possible to change the narrative again, and it has to come from the ground up.
Kate: It’s worth remembering, prior to the Reagen, there were very high taxes. Often, people say such taxes are impossible, but evidence shows that’s not true.
Abigail: My grandfather paid a marginal rate that was over 90 per cent.
Fernanda: The value of launching the discussion. We launched a report ‘Exploring the Extreme Wealth Line’ in January, we interviewed millionaires and politicians. It stayed with me the power of a heuristic tool. We need to open that door broadly. We’re strong on the idea of launching public debates, it needs to be a societal discussion. Once you open that door, quickly we go into values, and that’s what we need to talk about. Structures and norms are created by us. How intentional is it? It’s important for us to talk about the structural aspect. People living in favellas in my country of Brazil, they buy into the idea of getting rich as well. What we need is a political project. In the late 70s, early 80s, the neoliberal project picked up and it was also cultural. It used levers within our policy system: we live in a culture focused on individualism. Policies all over the world have been crushing the power of collective organising.
On spending, governments are given democratic mandates to meet people’s needs, which is why we need to scrutinise the spending. There is a study being done by the London School of Economics that is creating metrics for the wealth line. It’s not the same as measuring poverty. We need to bring in economists, psychologists etc.
Mainour, CESR: Building on the point about the global majority, I’m struck by how the conversation today mirrors the structure of inequality within the World Bank and other IFIs. Where do we go with it? Looking at other multilaterals, regional forums, on the national level, what could take us somewhere?
Kenya Human Rights Commission: We’ve done lots of work on wealth taxation, we have had public protests regarding over taxation. Wealthy individuals are growing exponentially in Kenya. We must now start connecting extreme wealth to politics, and change how we come back to this divide. The political class are making decisions. We did a study where we gave them the option to tax the land (in the hands of the few).
Anastasia, Centre for Society Research, Ukrainian CSO: Is philanthropy and charity a good tool for redistribution? On one hand, good use of money, on the other hand, it’s about democratic measures.
Amy, Bretton Woods Project: On the wealth proposal, have you engaged with the World Bank on this yet? If so, where are the discussions at? What was their response?
Global Citizen: Quick question on solution, are there potential solutions beyond taxation? Talking about values and thinking more collectively, what is in the interest of the extreme wealthy? How can we get their buy in (and political buy in)?
Abigail: Where do we go? Google the ‘Powell Memo’, written by a man who saw the US as taxing wealthy people too much, but he also had a dark right wing version of how he thought things should go. Published in 1971, every single thing he talks about, they succeeded doing: capturing universities, the legal system, getting mainstream news to move to the right. Everything has happened exactly as it was set out. The real change will have to be a lot deeper, longer effort. On the subject of philanthropy, no. I was at the Clinton Global Initiative, twenty years on from the first one I attended, and we had the same conversations, yet everyone in the room was fifty times richer. No one commented on it. The needs we talked about were worse. There was no sense of urgency in the room. We need to stop funding programmes, and start funding people and movements, which is currently dangerous talk, especially for foundations. My suggestion is do less, take longer, and spend more. No country in the world has ever had the kind of civil society this one has.
Fernanda: One of the wealthy people I interviewed said philanthropy is just an anti-democratic way of redistributing resources. The World Bank question: this is what we’re doing here today. We’ve been in touch with them, but more discussions need to be had. On solutions, we need political leadership. The example of Brazil’s presidency of the G20. Coalitions that can come out of these groups. It goes to the sovereignty of nations.
Nora: I think the Bank would not accept the idea of an extreme wealth line, except maybe in the context of association, collecting revenues, for shared prosperity. I would also be heuristic, it would not be the same as the poverty line.
