By James Pethokoukis
I think I’ve found an effective Rorschach test of sorts that reveals how a person thinks about economic growth, inequality, and fairness. The below graphic comes courtesy of Michael Stothard, editor of Sifted, a Financial Times-backed site that covers Europe’s startup scene.
As Stothard tweets, “Interesting contrast. The 10 richest US billionaires are almost all self-made tech entrepreneurs. The 10 billionaires in UK are mostly oligarchs, property magnates and dynastic heirs.”
Now some folks might view that “interesting contrast” as not so interesting at all. More like regrettable or even obscene. They might view both lists as displaying runaway wealth inequality. And if you’re part of the “all billionaires other than Oprah are a policy error,” crowd, then no further context is necessary.
But there’s another perspective: There is something intrinsically healthy about an economy able to generate massive personal wealth derived from starting and growing a massively valuable company. It’s a good thing if high-impact entrepreneurship that provides greatly valued goods and services is the best way to get superrich in an economy. (It’s also worth mentioning that billionaire-tolerant places, including Scandinavia, are also generally pretty great places to live for everyone.)
Let’s circle back to a late 2019 podcast chat I had with AEI economist Michael Strain about billionaires and what they mean for an economy:
Pethokoukis: Don’t we have to think differently about heirs than we do about people who actually made the companies? The children of Jeff Bezos will be fabulously wealthy. How does it help most families that they get to keep all of that wealth?
Strain: When we’re thinking about whether or not the distribution of wealth is a socially just outcome, I think it certainly makes sense to think about inventors and entrepreneurs differently than their heirs. But when I think about their heirs, I’m quite comfortable with their heirs having inherited that money.
I mean, what’s the alternative? Should billionaires spend as much money as possible while they’re alive so that they leave less inheritance? I don’t know why that’s better. The money’s not sitting under the mattress, right? If they’re not spending it, it becomes available for people to borrow and that helps people, and the economy. Should the government reach in and take it? I have problems with that type of punitive, confiscatory tax. And so if it’s not being used for consumption and it’s not being paid for in terms of tax revenue, then it has to be saved. And if it’s saved it has to be given to somebody.
I think it’s quite laudable that some billionaires want to give their money to philanthropic causes, but it’s their money — they earned it. If they want to give it to their kids, that strikes me as a perfectly reasonable thing to do.