Updated: Jul 16, 2022
By Brock Goleman
The word billionaire has become a household term. Just six years ago Bill Gates was duking it out with Carlos Slim for the title of world's richest man with nearly 79 billion dollars. In 2010 the world’s richest man was worth 53 billion dollars. As of May 2021, the world's richest man, Jeff Bezos, has an estimated 177 billion after a 38 billion dollar divorce. Without the divorce, he would be worth an estimated 215 billion. Consider this, the average worldwide income in 2013 was 10,000 dollars a year . Average U.S. salaries in 2021 are $66,039. Numerical disparities between the top income earners and everyone else are obvious, as is the lopsided growth rate. Emerging markets, and super growth arising from the enormous consumption of growing populations is disproportionately going into the pockets of the elite. With the onslaught of COVID 19 era economic strangulation, this problem has been exacerbated by the loss of income and jobs for unstable laborers enduring pandemic restrictions. Yet, there is still hope for those who want the wealth to spread around. Government investment, access to goods and services for the disadvantaged, and market opportunity gaps can all encourage economic equilibrium by distributing wealth in ways that benefit less advantaged populations. Thereby, lowering inequity caused by the wage gap.
Billionaires have all the fun right? Today's billionaire is widely represented in the media. The general public can’t get enough of the million dollar Bentleys and chateaus the size of malls. Yet, beneath the surface there is also something billionaires enjoy that is perhaps less overt. Access to wealth, power, and control that is not as easily seen by the majority of the population. Indeed, some of the world’s elite are born to a successful family, some are gifted with dubious political contracts and connections, others are blessed with good genes, still more just have good luck . Consequently, as the background of a billionaire contributes to their access to luxuries, it also represents a more important contribution to inequality. That is, extreme good fortune is a luxury often only appreciated by those who gain it through privileged means. As of 2012, only 35% of Forbes 400 come from middle or lower class backgrounds . This creates a problem as some billionaires are inclined to use their wealth to preserve their own interests in a members only club of sorts. For example, billionaires who made their wealth through political connections have been linked to creating lower incentives for others to do well by hoarding access to government funds and favoring selected accomplice contractors . Given that two thirds of billionaires come from money or elite privilege, there is a threat to encourage monopoly on whatever they invest in or suppress competition with their connections.. This creates the problem of billionaires being created by these instances where the economy operates sub-optimally through them and disturbes a healthy balance for the rest of society. While there are plenty of cases of hard working, inventive billionaires that made their living from efficiently operating within a fair economic framework. Still, the hungry mouths, lack of good living, and general monetary struggles of the majority present a great dilemma for society to encourage billionaires to let others in on the fun. The top income earners are able to gain more and more, while the bottom half are subject to less and less. How can society maintain the economy so that less fortunate members have a good chance for mobility, riches, and pursuit of monetary happiness? How can concerned economists encourage macro wealth, utility happiness, and a good life to those without a golden ticket in life’s lottery system that births others with the genes of Elon Musk, or family lineage of a Rothschild or Kennedy?
Re-distribution, taxes, education, here is hope for everyone else. Solutions to inequity in growth lie in the economy itself, the government, and the people. When calculating the many barriers to extreme success, it becomes clear that a majority of people are at a disadvantage to become billionaires, wealthy, or even attain comparable success. Heredity problems like an unstable upbringing contribute to mental instability that affects ambitions. Lack of education cuts down on the number of jobs a person can apply, for much less experience growth within. Lack of appropriate health care to recover from sickness can interrupt a good career. Limited access to money stifles would be entrepreneurs from creating successful startups. Therefore, initiatives that help disadvantaged societies alleviate these roadblocks to wealth creation are very important. From government incentives to make education free to banks who are incentivized to fund underserved populations, redistribution can provide hope to those without the silver platter trust fund. Michael Chu, Senior Lecturer at Harvard Business School, former trustee of Dartmouth University, and Partner of IGNIA, a fund that invests in delivering high impact goods and services to emerging middle class and low-income populations, states that providing financial and life services to lower income people is essential to eliminating inequity. Societal investment is the hope for social returns like mobility and wealth access.
Billionaire normality would be a good thing if the economy were able to produce them more evenly distributed. Yet, as of now, the take on monetary accumulation is lopsided akin to the gilded age. Worse yet, as partisan politics have distracted from public investment, the COVID crises hit and made inequity worse. 40 million Lower and middle class laborers filed for unemployment in the pandemic as wealthy financiers gained a half trillion dollars . Should the wealthy be required to give a portion back as a tax? Since they already have reserve spending money to invest while everyone else in society is broke, couldn’t they be expected to donate a percentage to reinvest in society? In contrast, covid has allowed Governments around the world to use treasury funds to assist these people. Funding for Covid protocols has opened the door to decrease equity. For example, the Corona-virus relief bill allowed student loan debt to be tax free . Yet, stimulus money could have gone to eliminating university tuition or funding small businesses, acts that ultimately would make more wealthy folks. If legislators and the voting public saw rising inequality as the emergency it is. The problem is people just don’t understand if re-distribution works. Some still believe the “Invisible hand” of Adam Smith’s era is all that is needed for a good society and economy. Inequality should just autocorrect by the individual pressures of market supply and demand. The best interest of society should be fulfilled by individual self-interests and freedom of productions and consumption . Then came the depression, recession, and pandemic. At this point, redistribution through the government alah Keynesian economics is all we've got. Scott Duke Kominers, Associate Professor at Harvard Business School and associate editor for The Journal of Economic Theory states that “We need to think about equity as well as efficiency when asking if the market is working. If we start to close the gaps to enough of a share of people who don't have access, the people will start producing, this adds long term value.”. This long term value is less class inequality manifested by investment in lower and middle class laborers, and thereby their being able to produce more wealth for themselves.
On the other hand, there is some evidence of an invisible hand regulating access to wealth. Many billionaires were created more from the post great recession regulations that allowed federal banks to make money available. Now, the pandemic has caused the savings rate to soar. Consumers are projected to unleash trillions of dollars in excess savings after the pandemic ends . This could have a great effect on the economy as households, not central banks or governments, fuel economic growth through injecting money that doesn’t affect the national budget and take away from public spending. Not only will entrenched billionaires have to compete for consumer spending, but discretionary purchasing can make others wealthy as well. Also, another example of a free market creating opportunities is the internet. The internet has surfaced as evidence of the market creating new ways to distribute wealth. In a shifting economy, opportunity gap pockets and career opportunities pass by entrepreneurs and workers with a time limit for getting in to make revenue. The internet has created a new marketplace that makes it easier for low to middle income people to take advantage of the speed to market. New jobs can be found with the click of a button. Consumer needs can be met by a wide variety of competing entrepreneurs. Costs to market have decreased and revenue has gone up. With the cost to market going down, many opportunities have appeared for low budget businesses to get started. The maker of a widget can now reach a wide audience with which to generate profit. For example, customers can purchase from a manufacturer of a regional cola from across the globe after discovering the product through an online ad. The rise of online education has given rural students the opportunity to study their desired degree at world class institutions. 20 years after it has become mainstream, the internet shows no signs of slowing it’s takeover of modern economic operations. This greatly benefits those affected by inequity as it breaks the hold of large corporations. Large advertising budgets and the wide logistical reach of large companies are being outmaneuvered by small producers as the internet brings customers and producers together to allow for maximum returns and growth of business. Just consider all the small businesses making sales strictly through the internet.
Whether through government infusion or natural economics, wealth creation for disadvantaged actors needs help overcoming roadblocks to access. Mobility may be a natural development of maturing economic resources, but without due concern the sky may get too high. Yet, through intervention, other stakeholders in the economy can grow as well while the economy develops. This will allow the economy to grow even larger with more education available, more capital for low income business people, and better goods and services distributed to a wider network of people who can afford them. Using the current state of the economy as a framework, we can see billionaires are quickly growing in numbers as the poor get poorer. The economy responds to demand to take shape, yet how the supply is created, from labor supply to production infrastructures, determines where the economy can go. Investing in disadvantaged people ultimately may make more billionaires out of them, but it should also ultimately make them better billionaires for it.