The Trouble with Billionaires by Linda McQuaig & Neil Brooks. Viking Canada 2010.
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
The Trouble with Billionaires focuses on the way in which democracy and the very fabric of society is eroded by the concentration of unimaginable wealth in the hands of a very few. As the rich grow richer, and the rest of us pretty much plod along as usual, our democracy begins to look less and less democratic and more and more like a plutocracy: a government run by and for the benefit of a wealthy elite. In twelve clearly written chapters, McQuaig and Brooks argue persuasively that billionaires have a negative impact on society.
The opening chapter outlines how the gap between the super rich and the middle class has been growing by leaps and bounds in the decades since the 1970s. The very first paragraph presents an excellent analogy to help you grasp just how much money a billion dollars is. Imagine that you are given a dollar every second, so $60 a minute, $3600 dollars an hour, for 24 hours a day. At this rate, you would be a millionaire in just 12 days! But to become a billionaire, at this same rate, would take 32 years. For the average person, a billion dollars is a nearly incomprehensible amount of money. Bill Gates has a fortune of about 53 billion dollars. Wall Street bankers collectively paid themselves a record $140 billion in 2009, odd considering they had just brought the world economy to the brink of collapse.
The level of inequality in America today is huge compared to historical standards. In 2008, the top-earning 1 percent of Americans collected 24 % of the national income. The extent of this income concentration is similar to what it was in 1929, at the time of the Wall Street crash. Compare that to the figures for the early post-war years. At that time, the top 1 percent collected 9 to 10 percent of the national income. You can find a chart of national income equality metrics at Wikipedia. Not surprisingly, the Scandinavian countries and Japan head the list of most equal societies. America ranks far down the list. Canada is somewhere in the middle, though moving towards less equality. The map, shown below, illustrating how countries compare in economic equality is also from the Wikipedia site.
The following chapters look at the fallacies of the free market economy, and compare the Crash of 1929 with the Crash of 2008. They share much in common. Does Bill Gates deserve his fortune? How about Tiger Woods and other athletes and film stars? Is more and more money the only reason people perform at their peak capability? Should the super rich be able to hide their money in tax havens? How does inequality erode democracy? How can the gap be narrowed?
In making their argument, McQuaig and Brooks introduce many intriguing and thought-provoking ideas. One example is the Pen Parade, proposed by Dutch economist Jan Pen in 1971. It works like this:
Imagine that every person in the economy of a country walks by, as if in a parade. Imagine that the parade takes exactly an hour to pass, and that the marchers are arranged in order of income, with the lowest incomes at the front and the highest at the back. Also imagine that the heights of the people in the parade are proportional to what they make: those earning the average income will be of average height, those earning twice the average income will be twice the average height, and so on. We spectators are also of average height.
You might think that the first people in the parade would be small and there would be a steady increase in the size of the marchers as the parade passed by. In fact, what the observer would see would be mostly a parade of dwarfs with some unbelievable giants at the very end. You can read more about the Pen Parade in this 2006 Atlantic magazine article by Clive Crook.
And did you know that Americans are shrinking? Yes. Getting smaller. For two and a half centuries, Americans have been literally the tallest people in the world. They had the bounty of the new world to feed on, plenty of game, rich agricultural resources. Americans averaged 3 inches taller than Europeans. However, the Dutch are now the tallest nation, with the average Dutch male standing 6 feet 1 inch high. They are followed on the top end of the height scale by other northern Europeans, Norwegians, Swedes, Danes, Belgians and Germans. Economic historians John Kormos and Benjamin Lauderdale have concluded that height is an indicator of how well societies care for their young, since height is set early in life. It is heavily influenced by nutrition, which reflects the broader social and economic conditions of a child’s life. The “shrinking American” highlights how the U. S. has failed to keep pace with other advanced nations in creating conditions that allow its own citizens to thrive.
After the crash of 1929 and the following depression, President Franklin D. Roosevelt moved to restore equality to American society by implementing controls on banks and high taxes on the wealthy. He was declared a traitor to his class and famously said “I welcome their hatred!” He ushered in an era of greater economic equality and productivity. I looked up his Madison Square Gardens 1936 speech on Youtube (such a marvellous resource!) It’s well worth a listen. If only we had such a leader today!
I didn’t know that the implementation of income taxes in Canada was associated with conscription in WW I. Labour and farm organizations across the country campaigned for “No conscription of men without conscription of wealth!”. See Opposition to Conscription here.
The Trouble with Billionaires concludes with six suggested steps that would result in a fairer society, starting with a progressive income tax scale. Currently in Canada, the top tax bracket is reached at about the $120,000 income level. The question is, how is change to be brought about? This major stumbling block remains unaddressed. A tiny first step would be an increased awareness and understanding of the issues at stake. To this end, The Trouble with Billiionaires is a good primer, highly recommended.