2020-08-03 The rich

Today I had an interesting conversation with @natecull on Mastodon. It all started with a comment of his:

“Most inherited wealth gets floundered.” Sounds fishy to me

I did hear something like that in a (German) newsletter of a fund manager friend of mine. Basically: where are the inheritances of the Fuggers, Medicis, Rothschilds, Astors, Carnegies, Rockefellers and Vanderbilts? When 120 heirs of Cornelius Vanderbiltim met in 1973, they had not one millionaire among them. There are still some rich Rockefellers and Rothschilds but they don’t compare with the fortunes of their ancestors.

He cites Robert Arnott, William Bernstein and Lillian Wu who looked at the richest people since 1982 based on the Forbes 400 and a study by Kevin Phillips of the richest US families going back to 1918. A simple look at the richest 400 in 1982 shows that only 69 of them or their heirs remain in the list from 2014. The problem is that the newly rich are so much richer you cannot compete by simply keeping your inheritance intact. In 1982 you needed $75M to be in the list, in 2014 you needed $1.5B, corrected for inflation that is eight times as much. The newcomers are simply so much richer, and maintaining wealth with investments is hard, plus you get to split it up with every generation.

Not that any of this is of any import to all of us that aren’t wealthy. It’s an interesting side note, but also pretty irrelevant when it comes to politics. Tax those fuckers!

My main takeaway was this: we actually have two problems: in the mid-term, the children of rich people are still rich and have tons of unfair advantages; and even if these dynasties are not a problem in the long term, the shooting stars of the ultra-rich still are a problem, but combating them is (surprisingly) not simply solved by stiff inheritance tax.

There is an additional problem, unfortunately: the way capital (rich people and big companies) capture politics. If you look at Switzerland, for example, you’ll see that the health commission in our senate has 13 members, and most of them have connections to hospitals, insurances, etc. One the one hand, it’s obvious: if you have the know how, why not volunteer for such a commission? But at the same time: this is the industry using politics to shape legislation such as to drive profit.

Some people think politics enables these companies to flourish, but now they’re no longer competing, they’re using politics to shape the market. It is a corrupting influence.

So, as seen from the left, some people clamour for a revolution. How else are we going to get rid of these rich people and redistribute their wealth? We can’t even enact laws to bring back inheritance tax, here in Switzerland! In our collective race to the bottom, we got rid of it, as the cantons try to out-compete each other for the lowest taxes in order to attract the richest people, which then in turn threaten to capture local government.

But… revolutions are dangerous. Who’s to say that things are better after the revolution? When we point at the Soviet or Chinese revolution, people like me say: “that wasn’t true communism!” There’s also the historic comparison made by the Chinese and Soviet communists: perhaps those years were bad, but consider the slavery, the robber barons, the civil wars, the crop failures and the famines before we came to power! Those arguments seem to get less traction these days, however. In any case, I think calling for a revolution is simply a way to start the discussion. I don’t want a violent revolution. We need to argue for incremental change instead of a revolution. Who knows who’ll win the revolution roulette! Not me, that’s for sure.

My guess is that just like people on the left believe in some pure-hearted do-gooder humans who’ll share gladly, the right believes in some pure-hearted market full of fully knowledgeable humans who’ll always trade fairly… Or something! Idealists, wherever you look.

I think we need small changes, and part of that is higher taxes. Much higher taxes! And since people and capital moves around, trying to evade taxes, we need to make a global effort: go after tax havens, put political pressure on them, go after rich people trying to leave a country. Luckily many of the newly rich don’t know they’re going to make big bucks later in life so they make their fortune while still in a country where they can be taxed.

I know the edge cases are painful. It’s painful to pay taxes in both Switzerland and the United States. It’s painful to have lived and worked in Japan and owing them inheritance tax if you don’t live there anymore. Those solutions aren’t perfect. But capital and people flowing freely, extracting wealth in one country and then not sharing the burden according to your means is simply ripping people off.

And don’t come at me with “tax is theft” – who ever thought of such stupid slogan? If you read up on the history of the idea, you’ll see that it always seems to boil down to a philosophical dispute of natural rights, social contracts, and so on. The practicalities of a functioning society doesn’t seem to have a place in this discussion which is also why I don’t care for it.

Where does that leave us? I think the answer is the very constant struggle we’re experience now and have been experiencing since the dawn of democracy. Our enemies decry it as a weakness, but that is just because they have chosen Scylla or Charybdis, unable to maintain their course. And of course, both Scylla and Charybdis and their adherents scream the loudest. But we must stuff our ears with wax and struggle for that blissful compromise, of a free market but with rules, of private property but with taxes. We win!

Comments

Steuern sind ok. Ich würde versuchen, sie einfach zu halten, auch damit nicht viel „unproduktive Energie“ gebunden wird. Aber es gibt auch Argumente für sehr komplexe Steuern, die alle Spezialfälle abdecken.

Schön ist es natürlich, wenn einem der Staat/die Gemeinde soviel bietet, das man es als irgendwie angemessen empfindet. Steuern einer korrupten Behörde zu zahlen ist wohl ein zyklisches und schwer zu knackendes Problem.

– Chris 2020-08-10 20:24 UTC


Das stimmt. Wobei es ja für die Umverteilung um mehr geht, als den Staat und die Gemeinde für ihre Leistung angemessen zu entschädigen: selbst wenn Staat und Gemeinde nichts leisten würden, ist eine Umverteilung nötig um der Kapitalakkumulation entgegen zu wirken, und die einfachste Lösung hierfür ist eine progressive Steuer, die man in extremis sogar einfach im Rahmen eines Grundeinkommens umverteilen könnte. Selbst ohne eine korrupte Behörde nicht einfach durchzusetzen, aber die Alternative scheint mir noch unerträglicher: Elend und am Ende Revolution oder Krieg.

– Alex 2020-08-11 16:26 UTC


Ja, Umverteilung ist auch ein Element! Ich sehe hier einerseits die Staatsquote und anderseits, was man mit dem Geld macht. In vielen armen Ländern ist beides nicht so toll; es ist zum Weinen... (Bei reichen Länder gibt es natürlich auch zu tun.)

Ein vertracktes Problem scheint mir, dass Umverteilung aktuell fast nur national geschieht: Gewisse Wohlhabenden und gewisse „national Armen“ scheinen das gemeinsame, unausgesprochene, krude Ziel zu haben, die international Armen nicht zu beteiligen.

– Chris 2020-08-12 19:02 UTC


Absolut. Wir sehen ja schon in der Schweiz das Problem mit dem Finanzausgleich: die Kantone haben einen eigenen Steuerfuss, müssen sich dann aber unabhängig davon am Finanzausgleich beteiligen. Gibt Streit. In der europäischen Union wird es schon schwieriger. Und ausserhalb davon... gibt es nichts. Ein Elend!

– Alex 2020-08-12 20:36 UTC


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