What would happen if we banned billionaires?
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Today the richest 1% of the global population own about half of the world’s wealth and almost two-thirds of the world’s new wealth accumulated since the pandemic began in 2020. Within such a global context of glaring and growing economic disparity, the question of banning billionaires takes on particular relevance. While acknowledging that past attempts at reducing the wealth of the richest classes have not been very successful, this essay will argue that banning billionaires has the potential of creating a much better world, both socio-economically and environmentally.
What social impact do billionaires have?
Billionaires undoubtedly have considerable constructive impact on the economy. They regularly reinvest their wealth, whether it be in the stock market or their companies. These vast sums of money are used to expand their businesses, which in addition to increasing employment opportunities, allow them to provide services more successfully and possibly at a reduced cost. Furthermore, billionaires generally have a higher risk tolerance than traditional institutional investors, hence the capacity to invest in riskier ventures that might not be enticing to more cautious investors. This capacity for taking risks can promote creative projects and ventures that have the potential to have a substantial positive societal impact. For instance, billionaires frequently invest in start-up companies that could have a hard time securing traditional financing. Startups are essential to the advancement of technology and the acceleration of economic growth. Due to this capital infusion, these businesses are able to grow, create jobs, and market cutting-edge products or services. As these businesses expand, they require personnel, materials, and services, all of which help the neighborhood and local economy. The degree to which billionaires contribute to the economy in the above valuable ways, however, varies greatly depending on their individual circumstances and the decisions. It is crucial to remember that not all billionaires produce value equally, and their impacts can vary. It is equally important to examine the extremely negative impact their huge investments in polluting industries, such as fossil fuels, has on the environment. A 2022 Newsweek article reports that global assets of 125 billionaires emit 393 million tonnes of carbon dioxide annually according to a survey released by the humanitarian charity, Oxfam. In comparison to the 2.76 tonnes of CO2 emitted by the average individual, this means that each billionaire emits an average of roughly 3 million tonnes of CO2 per person, producing almost one million times as much pollution as 90% of people. Due to such huge amounts of carbon emissions by billionaires, the responsibility for detrimental climate change becomes incredibly unevenly distributed. Mechanisms for banning billionaires
Because millionaires have not been banned in any nation in actuality, we can only hypothesize about possible mechanisms that can be used to do so. One possible strategy to implement such banning would be strict enforcement of a progressive taxing system. In a progressive taxation system, an increasing tax rate is enforced as income increases, with higher earners paying more in taxes then lower earners. Progressive tax systems generally generate more money than flat or regressive tax systems since the majority of taxes are paid by those with the highest earnings. A progressive tax also makes the wealthiest inhabitants pay a bigger portion of the cost for basic services that are needed by all people and businesses, such as road maintenance and public safety. It lessens the burden of paying taxes for those who can least afford it, helping the economy grow by providing low-wage people more spending money. Conservative economists and very wealthy social groups dislike the progressive tax because they perceive it as a barrier to success, and they advocate lower taxes and fewer public services. A radical progressive tax system could tax billionaires to a high enough extent that would reduce their wealth from billions to millions, in effect banning billionaires. Another potential avenue by which billionaires may be banned would be the implementation of a wealth cap. A wealth cap is a law that establishes an upper limit on a person's wealth, beyond which any excess is subject to penalties or redistribution. Although this, too, has not been put into effect in anywhere so far, the concept was introduced by the French economist, Thomas Piketty, in his 2013 book, Capital in the Twenty-First Century. By restricting extreme wealth accumulation, such as the accumulation of billions, it seeks to reduce income inequality and wealth concentration. While many from the wealthiest classes view wealth redistribution as unfair punishment, the wealth cap would help to balance the imperfections of the market and make society more egalitarian.
What happened when countries introduced the wealth tax: two examples
The wealth tax was introduced in India by the Parliament on April 1st, 1957, but was eventually abolished by the Union Finance Minister, Arun Jaitley (via the 2016–2017 Union Budget) due to escalating expenses and declining returns. Indian tax expert, Karan Batra, argues that the wealth tax was abolished because it was difficult for the administration to access all details, such as jewelry, cars, real estate, etc., so as to calculate the net worth and tax individuals accordingly. Later, it was replaced by an additional 2% tax on the extremely wealthy, with taxable income above $1 crore annually. The richest 1% of Indians possess more than 40% of the country's wealth, as compared to the poorest 50% of Indians, who own just 3%. Therefore, this is an effort at somewhat reducing the wealth gap; however, it does not ban billionaires. France tried a similar move when Francois Mitterand, the Fifth Republic's first leftleaning president, implemented a wealth tax in 1982. Although Jacques Chirac swiftly abolished it in 1986, it was reinstated two years later after Mr. Mitterand won reelection. The ISF (impôt sur la fortune) tax was in place until 2017, when the current president, Emmanuel Macron, ordered its abolition. The rate, which varied from 0.5% to 1.5% for assets over €10 million, applied to people with net worths over €1.3 million. Although it may have helped France's social cohesiveness, the revenue it generated was minimal. In 2015, 343,000 families collectively contributed €5.22 billion, or an average of almost €15,200 per family. Less than 2% of France's total tax receipts came from this sum. Additionally, it led to the emigration of France's wealthiest citizens. According to the research firm, New World Wealth, there was a net migration of around 60,000 millionaires from the country between 2000 and 2016. When these people left, France lost revenue from all forms of taxes, including income tax and VAT, in addition to wealth tax revenue. The so-called supertax in France, which socialist president, Francois Holland introduced in 2012 to target the wealthiest, had a shorter lifespan. Numerous French celebrities left the country as a result of the tax, which imposed a 75% levy on income over €1 million. For example, actor Gérard Depardieu moved to Belgium before obtaining Russian citizenship. Executives from leagues were concerned that the tax would make it more difficult for them to sign elite players as French footballers threatened to go on strike. Likewise, even in India, a similar trend of the wealthiest migrating to other countries can be observed. They are preferring to move to certain European cities, Dubai, and Singapore due to lower tax burdens. Therefore, attempts at restricting excessive wealth are merely ending up with many leaving their restrictive countries, with the goal of such restrictions remaining unaccomplished. The India and France examples reveal that unless wealth-restricting mechanisms can be implemented with significantly higher efficacy, the notion of banning billionaires cannot be translated into reality.
What would happen to the global GDP and employment if we banned billionaires?
The money of billionaires would likely be shared among the general public and/or used to pay for social welfare programs. Short-term economic growth would be fueled by increased consumer spending and investments in various industries as a result of this. However, because billionaires and their companies usually employ a large number of people, a prohibition on billionaires could lead to job losses, particularly if their businesses are forced to lay off employees or close due to changes in the investment climate or wealth redistribution. Moreover, as many billionaires spend their money on innovative and start-up ventures, less income may be available for entrepreneurship, impeding innovation and new business formations. The absence of billionaires might harm investor confidence and lead to capital flight, in which wealthy individuals and corporations move their assets and business operations to nations with better economic conditions. Yet, such disruptions could catalyze paradigm shifts within businesses that might prove hugely beneficial in the long run.
Would businesses in a post-billionaire ban world have to function differently than how they do today?
According to the Michigan Journal of Economics, in a world with the billionaire restriction, businesses would undoubtedly need to act differently than they do now. The ban would require an adjustment period for businesses since it would dramatically alter the economic environment, wealth distribution, and investment dynamics. Due to the restriction on billionaires, businesses may find it challenging to access the vast pools of private capital that wealthy individuals previously made available. They would have to research a variety of funding alternatives, including government subsidies, crowdsourcing, and enlisting the help of a bigger number of smaller investors. Governments may become more involved in the economy if billionaires are outlawed. Businesses may be required to negotiate new laws, taxes, and regulations that are designed to lessen wealth disparities and create equitable opportunities for all. In a world with the billionaire ban, companies may have to deal with increased expectations for social and environmental responsibilities. With a focus on correcting social imbalances and a redistribution of wealth, companies may feel pressure to prioritize sustainable practices, fair compensation, and support for social programs. Therefore, such required paradigm shifts within the business world would likely produce a wide range of beneficial socio-economic effects.
What environmental impact would the absence of billionaires make?
The statistics in the Newsweek article mentioned earlier in this essay make amply clear that the environment would thrive much better without billionaires, most of whose polluting fossil fuel industries generate outrageous amounts of carbon emissions. The same article points out that the billionaires’ extravagant personal lifestyles—marked by extensive use of yachts, private jets, helicopters, and other automobiles—are also shockingly carbon-intensive. Of these, the yachts and private jets proportionally release more CO2 and are the most unnecessary. A sampling shows that just 125 billionaires are responsible for more CO2 emissions than the entire country of France! Banning billionaires would thus bring about a drastic reduction in pollution and enable more sustainable environmental practices.
Final thoughts
A rapidly widening wealth gap and an equally rapidly deteriorating environment are two of the most profound global challenges we are confronting today. Because banning billionaires can contribute significantly to alleviating both these problems, it would be worthwhile now for economists, policy makers, legislators, non-profit organizations, and all other relevant agents to determine collaboratively which mechanism might be able to achieve this ban with the greatest efficacy.
Bibliography
“Abolish Billionaires.” The New York Times. https://www.nytimes.com/2019/02/06/opinion/abolish-billionaires-tax.html
Baggini, Julian. “Should we ban billionaires? A philosopher investigates.” Prospect. May 2023 Issue.
Constantine, Katie. “Top 5 Ways Billionaires are Bad for the Economy.” Oxfam America. January 15, 2023.
https://www.oxfamamerica.org/explore/stories/top-5-ways-billionaires-are-bad-for-theeconomy/
Costa, Nicolas. “The Economics of Billionaires.” Michigan Journal of Economics. November 17, 2020.
https://sites.lsa.umich.edu/mje/2020/11/17/the-economics-of-billionaires/
“Don’t Abolish Billionaires.” The New York Times. https://www.nytimes.com/2019/02/21/opinion/billionaires-innovation.html? action=click&module=RelatedLinks&pgtype=Article
Thomson, Jess. “What Would Happen to Earth if We Got Rid of All the Billionaires?” Newsweek. 11.10.22.
https://www.newsweek.com/billionaires-one-million-times-worse-environment-1758656
By Samridhi Kanoria
