The Forbes Rich List Seems Kinda Tone-Deaf This Year, Given All That Rampant Income Inequality Around
Celebrating uber-rich magnates like Donald Trump feels kind of off now.
Last week, Forbes released its annual rich list of the world’s billionaires. For the third year in a row, Microsoft’s Bill Gates topped the list – the seventeenth time he’s held the position. Interestingly, the net worth of the world’s billionaires actually dropped by US$570 billion dollars this year, attributed to volatile stock markets, drops in oil prices and a lift in the US dollar.
Still, the rich list’s top 20 hold a collective US$899 billion — a lot of money being accumulated by just a few people. According to the latest figures from the Organisation for Economic Co-operation and Development (OECD), the income gap has grown such that the richest ten per cent of the world’s population earn ten times more than the poorest ten per cent. Another report released by Oxfam in January this year suggests that the top one per cent of the world’s population will own more wealth than the remaining 99 per cent by next year.
As the income gap continues to widen, and billionaires continue to accumulate their riches (Gina Rinehart tops Australia at #127), one can’t help but wonder about what impact such wealth can have; it’s being spent on investments and interests, funnelled into fairly dodgy “philanthropic” giving or being used in environmentally, socially and commercially unethical ways.
Income Inequality Makes People Unhappy
For more than 30 years, the controversial “trickle-down” theory of economics championed by former US President Ronald Reagan has been used to justify wealth inequality like that held up as an example of progress by institutions like Forbes. According to University of New South Wales JW Fellow of Economics Tim Harcourt, “the view is if you make people really rich on top, ultimately they’re going to create enough wealth and it will trickle down to the bottom.” The problem, however, is that in countries like the USA, the theory of trickle-down economics hasn’t translated into real-world results. Though the country has experienced great productivity gains since the 1970s, growth has not been safeguarded at the bottom through lower-income wage increases and social policy.
According to the Economic Policy Institute, US productivity grew by 72.2 per cent between 1973 and 2014, but compensation has only grown by nine per cent during the same period. “If you don’t have labour flexibility and mobility where people can move up the income scale, then ultimately you’re going to have problems,” Harcourt explains. National Compensation Survey data shows that the higher the average wage of a company, the more likely that its employees are to receive paid sick and maternity leave, and ample retirement benefits. This reliance on welfare funding through the private sector compounds inequality — a system supposedly designed to enrich society’s poorest members has ended up entrenching their position at the bottom of the economic pile.
Harcourt points to the US’ grim economic landscape as one of the reasons why divisive characters such as Donald Trump and Bernie Sanders are doing surprisingly well in the Presidential elections. “People feel they’re missing out on the American Dream… Trump is just picking up on people’s anger.”
Philanthrocapitalism – Atonement For The Wealthy?
To curb anger over income inequality and provide hope for the masses, the wealthy often turn to philanthropy – especially in America. Two of the top ten richest people this year, Bill Gates and Mark Zuckerberg, are high-profile philanthropists. In partnership with his wife Melinda, Bill Gates’ foundation works to reduce global poverty and promote technological development in America. Last year, Zuckerberg and his wife Priscilla Chan pledged to donate 99 per cent of their Facebook shares to not-for-profits of their choice.
Critics argue that the world’s wealthy use philanthropy as a way of minimising or avoiding tax, and as Mel Campbell mentioned in her recent Junkee piece, the Chan-Zuckerberg initiative is one such example. It can also be argued that philanthropy is motivated by public relations, rather than a genuine desire to help others. In the New Yorker, James Surowiecki defends Gates and Zuckerberg, arguing that they respond to causes either too big or too controversial for a government alone, whether it’s eradicating malaria or providing universal Internet access.
These causes, however, are directed by the interests and passions of the individual philanthropist. According to John Fitzgerald, Director of the Asia-Pacific Centre for Social Investment and Philanthropy at Swinburne University of Technology, the only way that individual citizens can determine what philanthropists do is through their right to vote. “If philanthropists want to claim tax deductions through charitable donations, then they need to contribute to those causes we, through Parliament, decide are charitable,” he explains. But when the individual citizen has a negligible say in the decisions of a philanthropist, there’s a risk that public services better provided by the government instead become the playthings of the wealthy. “What if the funding had gone into public services provided by government? Would it have been more effective?” asks Fitzgerald.
If you’re anything like the controversial but intriguing ethicist Peter Singer, the decision is a no-brainer. Singer has long advocated for “effective altruism.” This school of thought dictates that you earn whatever money you can to live off, then donate it to causes that are defined as effective by sites such as givewell.org. So if you’re wealthy, keep earning money but donate a good proportion (the recommendation is ten per cent) to appropriate social ventures.
With Great Wealth Comes Great Responsibility
Wealth still has its issues, no matter how noble the philanthropic causes that some of it gets directed to. Some of the richest people in the world can attribute their wealth to industries that have serious social and environmental implications, such as pollution, addiction and consumerism. Apple, the key source of billion-dollar wealth for the late Steve Jobs, has been under the spotlight many times for its poor working conditions for factory workers in China.
Bill Gates, once again this year’s world’s richest man, may have revolutionised the personal computing industry. But, as the key decision-maker for Microsoft, his integrity was called into question due to anti-competitive behaviour. Through measures such as application incompatibility and patents, it was viewed that the company acted as a monopoly, preventing the viability of competitors entering the personal computer market.
Though the questionable behaviour of the world’s richest man may signal wealth as synonymous with corruption, Tim Harcourt is adamant that it’s possible to become wealthy without exploiting workers or cutting corners. Michael Crouch AO, a business investor best known for his previous role as Executive Chairman of Zip Industries, is one such example. He’s the titular donor of an Innovation Centre at the University of New South Wales that helps foster new ideas and develop two-way connections with business. “He’s a good honest guy and done it from nothing,” Harcourt explains. Though he recognises Gates’ misdemeanours, he argues: “his philanthropy has sort of made up for that. A third of his career was innovation, a third of his career was anti-trust and being naughty, and now another third is good again. None of us are saints.”
Though the world’s richest may be doing some good for society, not all do so with the purity of Michael Crouch. What’s most concerning is the non-existent influence the average individual has on where the money of the wealthy goes, and the shocking reality that thanks to these disparities, someone like Donald Trump could actually become the next US President. There’s need for some major economic re-thinking, or we’ll only see the current challenges exacerbated to no end.
Chelsea McIver is a freelance writer based in Melbourne. Her writing has also appeared in Broadsheet, VICE and ToneDeaf. She sometimes tweets from @ChelseaMcIver, usually while watching TV or for shameless self-promotion.