We live in a new Gilded Age. Inequality is accelerating; the 1 per cent of the superrich grows ever more dominant in its control over the proceeds of the capitalist economy. Meanwhile the middle class is hollowing out, literally disappearing even as the politicians offer snake-oil remedies to make it magically reappear.
Long ago, the journalist B.K. Sandwell said that “Toronto has no social classes / Only the Masseys and the masses.” The Masseys have faded, but who are today’s titans of the commanding 1 per cent heights, the heroes of the new Gilded Age? How do they propose to dispose of their vast wealth, to what effect on the rest of us?
Every once in a while a head pops up over the high parapets, and something is said or done that offers a brief illumination of motives. I will group these sporadic revelations into the Good, the Bad and the Ugly – in reverse order.
First, the very Ugly: Martin Shkreli, 32-year-old hedge fund manager, whose company, Turing Pharmaceuticals, took control of the drug Daraprim, which has been on the market for more than 60 years. Shkreli immediately raised the price of Daraprim, a lifesaving medicine against a parasitic infection, by more than 5,000 per cent to $750 a pill. Attacked for gross profiteering, Shkreli sneered that he should have raised the price even higher. He also purchased the only copy of a Wu-Tang Clan hip-hop album for $2 million for the satisfaction of denying everyone else in the world access to what only he could now hear. Called before a U.S. congressional committee, Shkreli smirked and yawned his way through, invoking the Fifth Amendment like a 1950s Communist before the House Un-American Activities Committee. He later dismissed the politicians as “imbeciles.”
Shkreli may come to a quick end: he has been indicted on serious fraud charges and dumped from control of a number of companies. But the gargoyle face of amoral greed is hardly that of Shkreli alone. Take the banking officials caught in the LIBOR rate-fixing scandal in the UK, or in scandals surrounding money laundering and other forms of fraud perpetrated by huge financial corporations. Forced to justify their behaviour, they appeared peculiarly indifferent, innocent of any inkling of immoral dimensions to their actions. Paraphrased, their rationale for their actions was: “Isn’t life just about making money? We use any means to make more money, because we can.” It is as if a generation of fund managers and investment bankers was born with a missing ethics gene.
Let’s move away from the Ugly excrescences to the merely Bad.
Volkswagen was an iconic fixture of the global auto industry. I still have fond memories of my own 1959 VW Beetle from the time when Detroit pigmobiles still ruled North American roads. One of the jewels of prosperous German industry, VW seemed a model global corporation. And then in 2015 came the shocking news of the so-called “diesel dupe.”
The U.S. Environmental Protection Agency found that VW diesels had a “defeat device” that could detect when they were being tested, changing the performance accordingly to improve results. VW was cheating U.S. emissions tests, deliberately dumping unmeasured pollution into the environment. The scandal spread to Europe and Asia. More than 10 million VW diesel cars have been recalled. This ultrarespectable corporation had set out to lie and deceive its customers and the governments that supposedly regulate the products they buy. CEO Martin Winterkorn, admitting that his company had “broken the trust of our customers and the public,” resigned under pressure. Given the careful planning of the deception, his real regret seemed to be that VW had been caught. Otherwise “trust” would have continued, and VW profits – and Herr Winterkorn’s executive bonuses – would have remained intact.
Again, the underlying philosophical rationale is this: making money is the only good; any method of achieving that goal is acceptable; “ethical considerations” mean not getting caught.
But there is a “Good” face of capitalism, one that surprisingly can be found here and there in the dot.com sector, precisely the sector whose rise has coincided with the rapid acceleration of inequality. Here among the 1 per cent can be found the heroes of the latest high-tech phase of capitalism, the entrepreneurs who carry out Joseph Schumpeter’s “creative destruction” by disrupting existing ways of doing business and starting over by thinking outside the box. Disrupters such as Microsoft’s Bill Gates have amassed vast fortunes from the global revolution they have helped bring about through personal computing and the Internet. If VW’s disgraced executives were scheming for dubious ways to retain profits from a traditional auto industry that has been around for more than a century, the executives of Microsoft, Apple, Google et al., starting with a clean sheet, may have different ideas about how to use their immense new wealth.
The Bill and Melinda Gates Foundation is the largest private foundation in the world (or at least the largest transparently operated private foundation). Bill Gates has donated at least $30 billion of his own money; the third trustee, after Bill and his wife Melinda, is another “Good” capitalist, the largest philanthropic donor in the United States, populist investment legend Warren Buffett. The Gates Foundation does excellent charitable and development work by any standard, especially in the developing world. By dint of its contributions, Gates stands beside political leaders on the world stage as a virtual equal, a private player alongside states with responsibility for issues like climate change, elimination of hunger and poverty and building global literacy.
Enter another 32-year-old entrepreneur, an apparent polar opposite of the execrable Martin Shkreli. Mark Zuckerberg is the inventor of Facebook – surely one of the most “disruptive” technology innovations of all time, changing the way more than a billion people communicate with one another across the globe. Already the subject of a Hollywood biopic while still in his twenties, Zuckerberg has within a decade amassed a net worth of almost $46 billion, according to Forbes. But he is not sitting on this. The birth of his first daughter occasioned a lengthy, touching posting (on Facebook of course) to announce a personal mission to help make a better world – in his words, “advancing human potential and promoting equality.” To advance this mission, the Chan Zuckerberg Initiative would be funded by a gift of 99 per cent of his $46 billion worth of Facebook shares.
It would be churlish to carp at this generosity. No doubt Zuckerberg can in this way do some good things for humanity, and it beats spending his billions on private yachts and bling. It certainly beats the behaviour of some of his 1 per cent colleagues – like the oil-drenched Koch brothers spending their money on behalf of climate change–denying Republicans, or the casino magnate Sheldon Adelson using his billions to undermine the Obama administration on behalf of Benjamin Netanyahu.
But churlish or not, a few observers have identified a nagging doubt. Once Zuckerberg places his shares in his charitable foundation, they are outside the reach of the taxman. Zuckerberg is saying, effectively, that he wants to make all the decisions on the allocation of his billions himself. No collective voice of the larger community will be permitted in this process. Zuckerberg may be a decent humanitarian, but he insists on being the sole judge in his own case.
Some may say that governments do all sorts of bad things with tax dollars and have a poor record of actual accomplishment as do-gooders. That may be, and perhaps Gates and Zuckerberg will be more effective. But governments do have one unique feature: they, alone among the huge organizations that today straddle the global economy, are accountable through the ballot box to the people they are supposed to represent. In our present Gilded Age, the heroes of capitalism are claiming a special status, above elected governments. Their successful private accumulation of wealth, they say, entitles them to the unaccountable, autonomous exercise of power.
Some of this power may be for good, but some may not: for every Zuckerberg there is a Shkreli. There is another problem too. Private wealth was not built in a Hobbesian state of nature, but on a publicly built and maintained infrastructure of law, education, transport, communication, heath care, welfare, defence and security – all paid for out of tax dollars. Those who have made most out of that system surely have a moral obligation to contribute more back, and not just according to their own whims.
Recently I was in Stockholm, where I had a tour of the city hall. A guide was explaining the Swedish tax system and the various uses to which taxes were put by the welfare state. Sceptical Americans kept asking about an “unacceptably high” level of taxation. The guide replied, memorably, “I’m Swedish. I consider my taxes my investment in my community.”
In the new Gilded Age, the connection between taxes and democratic responsibility is becoming unhinged, and with it the accountability of the economic oligarchs.
Time to think about getting to Sweden?
