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Adam Smith said that the self-interest of everyone in the economy acted as an invisible hand that guided towards the ideal outcome. But even he said that the moment a monopoly appeared, this distorted the field preventing any such ideal outcome.
Billionaires pose the same problem as monopolies. They exert a gravitational field distorting the market around them the way a black hole distorts space.
To compete against a billionaire is to fight a foe with endless reserves: No matter how much they might lose in a particular battle, there are more soldiers to fight the next one. This is how Russia continues to maintain a presence in Ukraine despite being outcommanded and outmaneuvered on the battlefield.
A small business, or even a large business, competing against a billionaire is akin to competing against a monopoly in the sense that they are effectively priced out of the market.
A billionaire or business can sustain losses in a pricing war far longer than any nonbillionaire. The first example that springs to mind is Elon Musk buying Twitter for a price roughly three times Twitter’s net worth, at a time when the company had trouble managing to turn a profit.
“As experienced auditors have left, the IRS has increasingly focused on simpler audits involving lower-income families — even though they account for a small share of unpaid taxes.” — NPR
The second example is hedge funds buying up single-family homes and pricing ordinary homebuyers out of the market. According to an analysis published in August by AMG National Trust: “In many metropolitan areas, traditional homebuyers are getting squeezed out in a seller’s market. People looking to own homes are bidding against not only traditional real estate investors who own a handful of properties but also faceless investment firms with piles of cash.”
A billionaire wields outsize political influence as well as the reputation of such. An article from April 2022 on the New York Times website quoted a researcher:
What we see basically is a class of people who have more money than God, who are very politically active in relatively unknown ways and who we have reasons to believe have been politically influential and have used their political influence in ways that don’t really serve the interests or preferences of what most Americans want…
This can lead to regulations written by the people or companies being regulated. Or tax policies catering to the very wealthiest in society. Even the dreaded IRS has a policy of not auditing tax filers that would require resource-intensive investigations, preferring to audit those with simpler tax returns.
According to an NPR report: “As experienced auditors have left, the IRS has increasingly focused on simpler audits involving lower-income families — even though they account for a small share of unpaid taxes.” This led to recent IRS hirings aimed at addressing this issue, but whether the increased resources will be used as intended remains to be seen.
The point is that the accumulation of resources that makes a billionaire is effectively the same as the cornering of a market that makes up a monopoly: It engenders outsized economic and political influence that distorts the market and makes fair competition impossible.
Many of today’s economic disasters have been the result of the deliberate unlearning of the lessons from the Great Depression. The most stark of these, in the sense that the undoing of the solution had predictable and horribly destructive consequences, was allowing banks to once again invest with the funds from savings accounts, which had led to many of the runs on banks and the creation of the FDIC.
Billionaires should therefore be treated as monopolies and “broken up,” whether they are super-massive companies or individuals.
The specific means of doing so would suit the task at hand: Companies can be broken up by law or regulation and billionaires can be taxed down to a wealth that, while plentiful, doesn’t have the gravitational pull to bend the economy around them.
In many ways this is reinventing the wheel. Huey Long made a national reputation saying no man should have more than a million dollars, a notion that is notably quaint today when millionaires consider themselves middle class. In the 1950s — a time often nostalgically touted for economic prosperity — the tax rate on income over $200,000 was 91 percent.
Now the top tax rate — even for the highest incomes, in the multimillions — is only 43 percent. And of course there is no tax on wealth per se and the estate tax exemption, which was $600,000 25 years ago, has ballooned to $12,920,000 for 2023. Not to mention all the high-end loopholes.
And that theme is not new either. Many of today’s economic disasters have been the result of the deliberate unlearning of the lessons from the Great Depression. The most stark of these, in the sense that the undoing of the solution had predictable and horribly destructive consequences, was allowing banks to once again invest with funds from savings accounts, which had previously led to many of the runs on banks and the creation of the Federal Deposit Insurance Corporation in 1933. Yet the Glass-Steagall Act was repealed and then banks crashed just nine years later in 2008 — with people saying “who could have guessed this would happen?!” And with neoliberals like Bill Clinton still denying the reality of cause and effect.
John Steinbeck said, “The poor in America see themselves as temporarily embarrassed millionaires.” The only thing that time has changed about that quote is it should be billionaires instead of millionaires, since, after all, millionaires are the new middle class, to themselves at least. And so wealth inequality is not the hot-button issue in the US that it is in some countries. Yet the US is capable of recognizing — as did even the founder of market theory, Adam Smith — that a concentration of economic power damages the free market. And beyond recognizing it, Congress has actually passed laws and, mirabile dictu, those laws have been from time to time enforced — such as the breakup of Ma Bell.
The “breaking up” of billionaires and billion dollar corporations is just an extension of antitrust and antimonopoly policy. And while this might result in a broken-up former billionaire like Elon Musk having one or two fewer private planes, and not being able to buy whatever social app he fancies and destroy it on a whim, would that really be such a bad thing?
Doug Ecks, Esq is a lawyer and writer. He graduated from UC Hastings in 2010 magna cum laude with a JD and Phi Beta Kappa from CSULB with a degree in philosophy. He also writes and performs comedy as Doug X.