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Labour’s billionaire bashing will backfire The super-rich are the product of an economic system that is making the world better

The shadow chancellor John McDonnell (Photo by Leon Neal/Getty Images)

The shadow chancellor John McDonnell (Photo by Leon Neal/Getty Images)

November 19, 2019   6 mins

There’s a principle in evolution, which is that a gene mutation with a small effect can sometimes be good, but mutations with large effects are almost always bad. Imagine you have a species of deer. It’s a quite successful deer, pretty good at running away from cheetahs. But its legs are fractionally too short for optimal running. If it has a mutation that changes the length of its legs by half an inch, there’s about a 50/50 chance that it’ll be in the right direction, and even if it’s in the wrong direction it might not be fatal. But if it has a mutation that lengthens its legs by two feet, it’ll almost certainly render it incapable of running at all.

I’ve been thinking about this lately because everyone is talking about billionaires. For instance, there was a very stupid row recently after Bill Gates was quoted as saying that he would be left “counting what he had left over” under tax proposals by Elizabeth Warren, one of the frontrunners in the race for the Democratic party’s nomination for president.

The reason I say it was stupid is because literally the next words that Gates said were “I’m just kidding,” and that he had a moment before said that he had already paid about $10 billion in tax and was happy to pay twice that. Gates — who has also given away about $45 billion to his charitable foundation, to pay for among other things malaria treatment — is a weird example to pick as a representative of the class of “greedy billionaires who want to hide all their money away from the taxman”, but people did it anyway.

But there have been less stupid conversations about billionaires too, coming from the Labour Party. It started with Labour’s Lloyd Russell-Moyle saying on BBC Radio 5 Live that no one should be a billionaire. Then Jeremy Corbyn had this to say, when he launched the Labour election campaign: “There are 150 billionaires in the UK while 14 million people live in poverty. In a fair society there would be no billionaires and no one would live in poverty.” Then, this morning, the shadow chancellor, John McDonnell, was on the Today programme talking about it too. McDonnell is a bit cannier than those two, so he didn’t outright call for the end of billionaires, but he agreed that the inequality was “grotesque”.

First: are Corbyn’s numbers right? I can answer that quickly: yes, close enough. If you go down The Sunday Times Rich List, you get to number 152 before you reach someone whose wealth is listed as less than £1 billion. Perhaps there are technical reasons why that’s not the right way to look at it, but most of us would be happy to say that Corbyn is right. And the Department for Work and Pensions says that 22% of the population lives below the line of “relative poverty”, that is, in households that earn less than 60% of the median household income, after housing costs; that’s about 14.8 million people. Again you could quibble with the definition, but it would be quibbling.

So the question is: would getting rid of billionaires improve things? Would the fairer society (let’s just shortcut the “what is fairness” debate for now) that Corbyn envisages be brought closer by removing all the billionaires from Britain?

One point I’d like to make. I think it is likely that the money that Bill Gates has paid in taxes has done far less good than the money he has given away, by most people’s definition of “good”. Let’s imagine that all of the $10 billion he says he’s paid in tax has gone to the US federal government. Here’s a breakdown of the US budget, which tells us that of that $10 billion, about £800 million will go on servicing the national debt, and about $1.5 billion on defence. About $2.5 billion will go on social security, and about the same on Medicare and Medicaid. All the rest will go on assorted infrastructure spending and national payroll and so on.

If he’d given it to his own foundation, according to the Bill & Melinda Gates Foundation’s 2018 annual report, about $3.6 billion would have gone to “global development”; about $2.7 billion to “global health”; and about $1.3 billion on “global growth and opportunity”. Breaking it down further, a quarter of the “global development” fund would have gone on delivering vaccines, a bit more than a quarter to combating polio, 16% on family planning. Of the “global health” fund, about 30% has gone on malaria and HIV prevention and treatment.

If you want to improve the world, at least if you take “improving the world” to mean roughly the same things I do, you would much rather that Bill Gates’s money was spent fighting malaria than servicing the US national debt or paying for F-35 Lightnings. I’d even rather it was spent fighting malaria than going to Medicare or social services. The charity evaluator GiveWell estimates that by providing cheap antimalarial bednets, you can save one child’s life for about $2,800. It costs about four times that to provide one month of treatment for the average cancer patient in the US.

And most of the money going in taxes will not be doing that; it will be building roads in Topeka or paying civil servants’ wages. These are important things, but if you want to maximise the number of lives you save, the money is much better spent on the Gates Foundation or other well-run charities working in the developing world than it is on the US government. There’s a much more rigorous examination of this idea here.

But this is not an overall argument in favour of not taxing billionaires. Not all billionaires are Bill Gates. Jeff Bezos and Warren Buffett and William Hewlett have also donated billions to good causes, but not all do, and some give it to, for example, Harvard University, where it will fund the education of mainly already rich people. Let’s imagine that the amount given to charitable foundations is utterly overwhelmed by the amount that could be taken off them in taxes, so even accounting for the gigantic mismatch in how much good a dollar will do if you give it to the Gates Foundation rather than the US federal government, it’s still better if you take all the money off the billionaires and give it to the taxman.

The next question is: do we think that will lead to fewer poor people? I assume that’s the goal, rather than making billionaires poorer being a goal in its own right. If so, then I should come straight out and say I am deeply sceptical.

Here’s my reasoning. Billionaires are one product of the loosely defined economic system that we call “capitalism” and which has largely taken over the world since the collapse of feudalism. Luckily, they’re not the only product of that system.

In that time, worldwide, there has also been a spectacular drop in child mortality; a spectacular drop in world hunger; a spectacular growth in the number of democracies; a spectacular growth in life expectancy, especially in the developing world; a spectacular growth in levels of education, especially female education; and many other good things I can preface with the words “a spectacular”. (Just go here and look at “research by topic” to see a load of graphs that can be summarised as “good things over time: up; bad things over time: down”.)

That economic system is, of course, flawed and, like the US federal budget, allocates loads of money in ways that are not optimised for global improvement. A hypothetical god-like superintelligent AI could probably run the economy much better. But the hugely imperfect system we have has steadily improved things, nonetheless.

That’s not to say we couldn’t make improvements to it. But remember the deer? You can make improvements to complex but essentially functional systems by changing them slightly, not by making their legs two feet longer.

By analogy, the economic system sort of works. It is making people better off and healthier and longer-lived (and, it seems, happier). We could improve it; make its legs a little longer. Making billionaires pay significantly more tax (Gates said he was happy to pay double, remember) seems a making-legs-half-an-inch-longer sort of idea. It might make a few of them move to Grand Cayman, but it should increase tax revenues, and not increase the unemployment rate or damage the economy too badly. If it doesn’t work out like that, at least you haven’t irretrievably screwed a global economy that is slowly lifting people out of poverty, and you can change it back. As McDonnell said on Today, there’s plenty of room for a flatter, more equal society, without getting rid of billionaires entirely.

But “making it impossible for there to be billionaires any more” seems more like a making-legs-two-feet-longer sort of idea. The economic system creates very rich people, often but not always as a reward for creating or selling things that people want, such as Harry Potter or Microsoft Windows or petroleum. I don’t know exactly how you’d change the system to stop it doing that (and Corbyn hasn’t, I think, been specific), but it’d have to be something pretty radical and profound. And then you really do run the risk of doing terrible damage to the workings of the economy. Maybe Corbyn, Russell-Moyle and McDonnell are sufficiently farsighted and brilliant to be able to do it without screwing it all up, but I am unconvinced.

Billionaires is one of those words that sets off culture wars. It has more meaning than simply “someone whose net worth is equal to or greater than one thousand million local currency units”; it’s capitalist oppressor or captain of industry, our team, their team. But billionaires, for better or for worse, are the product of an economic system that is, slowly, jerkily, unevenly, making the world better. If we want to get rid of them altogether, rather than nibble away at the edges, we need to be damn sure we’re not tearing down Chesterton’s fence.

Tom Chivers is a science writer. His second book, How to Read Numbers, is out now.


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