10/5/2020 There’s no such thing as a self-made billionaire - The Correspondent

10 days ago • Reading time 11 - 15 minutes •

For all their talent or intelligence, a person stranded on a desert island with no
technology, infrastructure or labour wouldn’t be able to amass extreme wealth.
Understanding that no one can claim that they fully deserve what they earn is
the first step to addressing wealth inequality.

There’s no such thing as a self-made

billionaire
Professor of ethics of institutions

Ingrid ROBEYNS

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Illustration by Reza Hasni (for The Correspondent)

T
he fortunes of the super-rich have reached staggering levels, and for
decades, inequality’s been rising.

To get a sense of the scale of the problem, here are three sources. First,
Credit Suisse, whose "Global Wealth Report" has, for the past 10 years,
documented the rise of the super-rich and the growth in global inequality,
found in 2019 that the richest 10% in the world owned 82% of all wealth.
The top 1% took 45%. The bottom half of the world’s population has only
1% of global wealth.

Why we’re publishing a series on billionaires

To make those numbers more vivid, Forbes’ billionaires list gives a real-
time, daily update of the fortunes of the richest in the world. The top ten
richest men (yes, all men) have a total of $967,000,000,000 – a number
that will surely be incomprehensible to most of us.

A third source that is worth mentioning is Thomas Piketty’s book Capital

in the Twenty-First Century. His research, which takes a longer-term
view, reveals that, since the end of the 1970s, wealth inequality in most
countries has been on the rise – and quite dramatically so.

Many citizens and scholars believe that some limited degree of inequality
serves a function and is morally acceptable, but is there a point at which
inequality becomes too large and the super-rich have too much?

Several years ago, I started to investigate the philosophical reasons we

might have for the view that, at some point, when a person gets richer and

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richer, they have too much. In

fact, this view has been put
forward in somewhat different
forms throughout the history of
ideas.

I’ve suggested that we call this

philosophical view – that there is
a moral limit to how much we can
have – limitarianism. It is not as
demanding as some forms of
egalitarianism, since
limitarianism accepts that some
level of inequality can be
acceptable, though with a clear
cap on how much inequality there
could be. We could debate where, exactly, we should put that limit on
wealth, but it certainly would rule out the current concentration of wealth
among billionaires.

One striking feature in the reactions that people have when they hear
about limitarianism is that some find it is self-evidently true, while others
think it is an outrageous proposal. Clearly, in pluralist societies, citizens
will differ in how much they care about equality and whether they think
there is anything wrong with people being billionaires. As such, it’s
important to look at the reasons why excessive wealth and extreme levels
of inequality are wrong, so that we can make up our minds in an informed
way.

The negative consequences of concentrated wealth

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Some of these reasons against having too much have to do with the
consequences of massive fortunes, independent of whether these
fortunes have been acquired through entrepreneurial activities, from
inheritance or another form of luck. Here are three of the most important
of those bad consequences.

The first is that extreme wealth allows rich people to undermine

democratic values, for example, through lobbying or massive campaign
spending. An equal democratic playing field is also undermined if the
super-rich have a much larger capacity to influence the creation of
knowledge, information sharing and the shape of the public debate, which
they do by setting up think thanks, establishing professorships at
universities and buying up media outlets. In the US, the Koch brothers
are a notorious case of billionaires distorting democracy, but the
phenomenon can be found everywhere, albeit often at a smaller scale.  

A second bad consequence is that higher

levels of wealth do not contribute much to
We should use the excessive
our well-being and flourishing, whereas
wealth of billionaires to save
the planet much human suffering could be prevented
if that same money was spent on the
elimination of poverty or societal
challenges. A clear statement of this argument has been made by the
effective altruists, who argue that all of us who can afford to make
donations should not only try to do good with that money but also use it in
a way that is most effective in doing good and eliminating suffering. 

A third bad consequence of excessive wealth is that the billionaires are also
much more involved in ecological destruction. For almost all of them, this
is due to their lavish lifestyles, which are environmentally very damaging.

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The French economists Lucas Chancel and Thomas Piketty have estimated
that these lifestyles lead the richest to have, on average, up to 30 times
the average emissions of people in rich countries and up to 300 times the
average emissions of citizens in countries with the lowest emissions levels.

Similarly, a recently released report by the Stockholm Environmental

Institute and Oxfam provides further evidence that the rich, and especially
the super-rich, are disproportionately responsible for greenhouse gas
emissions. It would be much better to have green taxes that make the
polluters pay, rather than subsidising the fossil industry, as is currently the
case in many countries. We should use the excessive wealth of billionaires
to save the planet.

Do billionaires deserve their wealth?

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The super-rich and their defenders are generally not impressed by this
type of reasoning. They argue that we might debate whether these
consequences are all so bad, and that, in any case, they could be tackled in
different ways – eg by regulating lobbying or introducing ecological
taxation. But more fundamentally, they object to the moral force of
these consequentialist arguments against excessive wealth, countering that
these fortunes are the result of hard work and the enormous contributions
they made to society. There is nothing wrong with the fortunes they
amassed, they argue, because they deserve their fortunes. 

The idea is that billionaires

deserve their wealth because they
can claim credit for the causes of
this wealth creation. These causes
could be hard work, their
immense efforts, being smart or
being talented. That hard work,
those efforts or the invention
caused by being smart and
talented could lead to a product or service for which large demand exists in
society – such as, for example, a vaccine for Covid-19, which is
subsequently sold to many millions of people. Or it could be
entrepreneurial activities that are sold massively, such as the sale of a song
by an artist. In all these cases, the thought is that the wealth can be traced
back to entrepreneurial success, and hence the wealth is deserved. 

In political philosophy, this argument is known as the "desert-based

argument", and the idea that we can take individual credits for our fortune
is one that is also dominant in contemporary capitalist societies. However,
political philosophers have argued repeatedly that if one analyses this

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argument carefully, it becomes clear that it is very weak – that it cannot

be used to justify the wealth of the super-rich. In a nutshell, their
arguments show that much of what the super-rich claim as “theirs” is,
upon closer inspection, not (fully) attributable to them, but rather to
factors beyond their control, including the structures, inventions and
institutions created by others.

Fortunes belong to the collective, not the individual

Part of the answer of what is wrong with the fortune of billionaires was
recently put very well by MacKenzie Scott, who is a billionaire thanks to
her entrepreneurial activities with former spouse Jeff Bezos. She
recently wrote a blog post that started with the following paragraph: 

“Last year I pledged to give the majority of my wealth back to the society
that helped generate it, to do it thoughtfully, to get started soon, and to
keep at it until the safe is empty. There’s no question in my mind that
anyone’s personal wealth is the product of a collective effort, and of social
structures which present opportunities to some people, and obstacles to
countless others.”

This statement captures the essence of why no one can claim that they
fully deserve what they have earned. Extreme wealth is almost never the
result of one person’s actions, but rather the result of the actions and
choices of a lot of other people. Moreover, as economist Mariana
Mazzucato showed in her book, The Value of Everything, many of the
innovations on which entrepreneurs who made fortunes relied were
dependent on innovations that had been funded by the government – and
hence, the taxpayers. For example, the worldwide web, which has enabled

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the success of many of the super-rich, was invented at Cern, a public

research lab funded by European taxpayers.

We cannot create prosperity without standing on the shoulders of

generations before us, and hence, our own contributions to our success are
limited.  

Here is a thought experiment that drives the point home. Take any 21st-
century billionaire and move them to a society with a limited
infrastructure and a primitive level of science and innovation. It
immediately becomes clear that most fortunes are not possible without
relying on technology and institutions created by others and often paid for
by taxpayers.  You could consider this as a collective legacy, and then ask
yourself how the fruits of that legacy are to be distributed.

The economist and political scientist Herbert Simon once wrote that
some 90% of what we can earn in the marketplace is due to the inheritance
of science, innovation and beneficial societal institutions that previous
generations left us. When you look at the deeper causes of what we are
able to do today in this way, it makes sense to argue that a much more
radical redistribution is justified. Moreover, this point is independent of
the “bad consequences” reasons I mentioned at the start: even if, for
example, the urgent needs of others were all met, we still have to respond
to the criticism that this is, to a large extent, the fruit of a collective legacy,
making it impossible to claim that my fortune belongs to me morally.

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The underlying variables of wealth creation

What’s more, supporters of the idea that billionaires deserve their wealth
forget that luck and structures play a major role in our lives. And for both
pre-existing structures, as well as for the influence of luck, we cannot claim
any credit if they work at our advantage, nor should we be blamed if they
work at our disadvantage. In the case of those living in poverty, this has
been argued repeatedly: they are often poor not only because they have
had too many spells of bad luck but also because they suffer from
structures that disadvantage them much more than the middle classes and
the rich. But how do luck and structures influence the lives of the rich?

Here are some of the factors that mostly determine the odds that we will
be economically successful: the country in which we are born and the
quality of its societal institutions, our innate talents and health, how we

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were raised and by whom, the public support we can call upon if we are
not born in a rich family and so on. These factors have a great deal of
influence on the opportunities we have in life and our chances of success,
but we do not owe these factors to ourselves at all. We might just as well
have been born somewhere else, with a different ticket from the natural
lottery and a different set of structures and institutions that other
members of society have created for us.

Properly crediting the vast role that luck and structures play in our lives
does not imply that we should no longer be proud of our achievements –
quite the contrary. After all, the efforts and creativity of individuals are
always needed before prosperity is created, and anyone who makes an
effort and is successful while playing the game fairly has every reason to be
proud. But the awareness that luck and existing structures play such a
major role in what we can achieve leads to a different attitude than the
meritocratic one that claims the money I reap in the market is morally
deserved.

Anyone who becomes economically and

financially successful should therefore not
We might just as well have
be congratulating themselves with their
been born somewhere else,
with a different ticket from the success in the first place. Instead, they
natural lo ery should be counting their blessings, being
grateful with so much luck and then doing
what befits that insight – namely standing up for fellow human beings who
have been less lucky. And when, as citizens, we contribute to the political
decisions regarding what kind of society we want, it means properly
recognising that both luck and societal structures play a major role in what
people can make of their lives.

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Embracing this attitude would give us a reason to favour the post-second

world war European welfare states, which have been in decline in recent
decades. The welfare states supported those who had bad luck in life and
included limits to earnings and wealth acquisition. Hence, they had a
significant egalitarian effect. On the one hand, basic public provisions such
as accessible tertiary education, pension systems and public health care
meant that there were more genuine opportunities for all to create a good
life. This was funded with a progressive tax system, which reduced
economic inequalities.

Moreover, companies and firms often saw themselves as part of the

communities in which they operated. In recent decades, however, the
increasing stress on individuals’ own responsibility for their fate, rather
than acknowledging the effects of structures and luck, has paved the way
to dismantle the welfare states. As a consequence, many vulnerable
citizens are worse off, and the rich encounter fewer restrictions to
becoming super-rich.

What about exceptional productivity?

Another argument which defenders of billionaires might put on the table,
as the Harvard economist Greg Mankiw did in his paper "Defending the
1%", is that top earnings reflect top marginal productivity. Because a
CEO contributes so much to the productivity of the firm, he is able to
command a very high pay (whether paid in salary or bonuses). But this is a
theoretical claim without empirical support.

In reality, top incomes do not always primarily reflect the productivity of

the top manager in question, but are instead the result of a set of shared
norms and values of top executives who consider it normal for them to

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earn such high incomes. The extreme earnings of top managers do not
reflect the very high added value that their work brings to the organisation
or the company. They instead reflect what they are capable of negotiating
in the labour market for top earners, and that negotiation also reflects
what this group of people tell each other their work is worth. 

Of course, there are reasons why some differences in pay can be justified.
In part, some limited degree of wage inequalities can be justified on
efficiency grounds: we simply want to have enough surgeons as a society,
and it then helps to give people who are talented in this area the prospect
of good pay. If a potential surgeon can earn as much as a yoga teacher or a
bookseller, the question is whether we as a society will have enough
surgeons.

In professions that are intrinsically or instrumentally valuable to society,

we want people to receive financial recognition for great efforts – efforts to
develop their own talents and skills, bearing greater responsibility or
performing key functions in the service of organisations, companies or
society. It is also a matter of paying respect to a person if we recognise the
effort they make. Yet, these considerations can, at best, justify some
(though limited) inequality in pay and not the excessive inequality that we
have seen in recent years. 

We may rightly tell ourselves that if we worked hard, we deserve a reward. 

But no one can say that they deserve to be a billionaire.

Dig deeper

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Read the piece by Ann Pettifor here

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Read Rutger Bregman’s article here

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