Once upon a time, I found myself in a tiny Yonge St apartment with a few others and the very woman who helped lift Conrad Black to financial mogulhood. She was Maude McDougald, the widow of Bud McDougald, once head of the powerful Argus Corporation, and one of Canada’s richest men.
My meeting with the quite elderly widow McDougald, she of the famed maneuvre which helped finagle the chairmanship of Argus for Black, was a weird affair – we were there to meet an aboriginal activist from the Amazon. How she came to consort with the editor of an alternative weekly and a few assorted ecologists was a complicated story that involved her chauffeur’s off-the-job passions.
It was my first and probably final intimate encounter with the obscenely monied, and my impression of the regal woman sitting beside me was that she’d lived in pretty narrow circles and that a trek up the dark steps to a flat on Yonge was about as edgy as she wanted to be.
I was remembering all this recently, reading The Trouble with Billionaires, by Linda McQuaig and Neil Brooks. But I had to make a mental adjustment: the estimated worth of Bud McDougald when he died in the late 70’s was about $936 million in current terms, he wouldn’t have even made it into McQuaig’s and Brooks’ book. Wealth is now surging to a historically stunning degree: over the past dozen years alone, for example, the authors point out, compensation for the 50 highest paid CEO’s has risen by 444%.
What exactly do we make of this? Of course, it’s obscene, offensive and immoral. But one might say The Trouble is a polemic against viewing inequality as an ethical issue the authors prefer to stress its practical consequences – a large income divide really sucks for economic stability.
In fact, they blame it directly for the 2008 market bust-up. Sure, financial high rollers repackaged and sold worthless mortgage investments. But the real issue, they say, in a narrative that moves along at the clip of detective novel, is that capital-laden folk gravitated towards speculation in the volatile financial sector, because the decline of consuming power in the population created a deficit in decent investment opportunities. If there’s nowhere for mucky-mucks to put their money in the real economy, they’ll head for the fictive one, is the message.
The book quotes World Bank economist Branko Milanovic: “The real cause of the crisis is not to be found in hedge funds and bankers who simply behaved with the greed to which they are accustomed. The real cause lies in huge inequalities in income distribution which generated much larger investible funds than could be profitably employed.”
By the way, have I mentioned how much I adore this book with its policy smarts and folksy style? And the weird way it never tells you what you already know? Like try this one: inequality makes governments have to spend more public dollars than they otherwise would. How’s that for a new wrinkle on the tax revolt?
Or put another way, the taypayers are paying more to government coffers than they should, simply because there’s no political will to re-destribute wealth.
“The most important ingredient in determining social well-being,” McQuaig and Brooks write, “is the level of equality, not the amount of public spending. High levels of public spending are important in Western countries simply to compensate for the very unequal distribution of market incomes.”
And speaking of taxes, you’re probably not surprised to learn there’s a flattening of tax rates at the top. It’s a form of rich people’s robbery, The Trouble says. Wealth accumulation comes when enterpreneurs borrow heavily from discoveries in the public realm. Bill Gates is their poster boy in several pages, the book takes pains to point out Gates wasn’t the real pioneer of the personal computer revolution. Rather, he sucked up the work of a contemporary, not to mention history’s legacy (the authors trace the first digital machine to a 19th C punch-card weaving in France.)
Stealing others’ best ideas and refining them, of course is legitimately part of the entrepreneurial paradigm, but the problem comes in, say McQuaig and Brooks, when the successful use their lobbying power to limit their tax hit. That social debt never gets paid back.
Innovation, they write, is accumulated social capital: “if most of what we are able to create is inherited from the past, it seems reasonable that any resulting windfall should go back to society.” You can argue it’s a question of fairness, or just payback on a loan. The trouble with billionaires is that they’ll just never see it that way.
