The power that billionaires have

The world got a good laugh the other week when the World Economic Forum announced that its annual Davos meeting would focus on inequality. As photos of Bono hanging with Hapsburgs trickled out, accompanied by the gushing features of financial journalists treated to five-star junkets at the gabfest – which has all but retreated to its mountain redoubt these days, largely because of the besiegement it got in Melbourne in 2000 – even its supporters couldn’t keep a straight face. What grabbed more attention was an Oxfam report released, which suggested that the richest 85 people in the world now control as much wealth as the bottom 50 per cent – about 3.2 trillion dollars. That stat seemed to sum up the trajectory of much of the last thirty or forty years – a movement away from some sort of global redistribution, towards a new charnel house. Doubtless for some the statistic was enraging and ennervating; for others, depressing and dispiriting – to have come all this way and for things to have gotten so much worse.

Certainly, there has been a rise in inequality of recent years in both the West and the developing world. The former is a reversal of gains won post-Second World War up to the late 1970s, the latter both a product of genuine development (China) or, elsewhere, of a backslide (the Philippines, as one example). But in each case much of the division, in terms of life-chances, has occurred between the working class and the professional-managerial classes – that is, the creation of a large distinct class of ‘working poor’ in the US, whose comparative income with lower-level professionals has collapsed dramatically. Within conventional capitalist relations, comparable conditions were separated by decades.

But the more you widen the scope of comparison, the less useful it is. By the time you compare the ‘85 weathiest’ to the ’50 per cent poorest’, you are making a quantitative comparison of qualitatively different things. Comparing a GP’s salary and a motel cleaner’s in 1974 and 2014 is to compare real incomes and purchasing power; but to assess the wealth of the 85 richest is to ask a metaphysical question. Capital is always imaginary, in one sense, financial capital doubly so. When the wealth is made up of a significant degree of intellectual property, immaterial high-tech, rights and production royalties, then the abstraction is tripled. Is Bill Gates worth $90 billion, with the bulk of that wealth a share of a common that sells ones and zeroes? In one way yes, in another no. The wealth could never be cashed out in one hit, and can be divided only to a limited degree.

These highly abstracted values are part of the rhetoric of capitalism and its superior nature. Yet this stature is achieved through a vast projection of capability and future profit, which is a distortion of the current and immediate-future real assets of a society. Even fortunes ‘backed’ by material assets are vastly inflated as a result of projection. Take the rise and fall of the ‘billionaire’ Nathan Tinkler: did he spend a billion to be so near to bankrupt that he is reportedly not paying basic household bills? Of course not. It was that the mix of bank debt and projected value on a range of mining leases never existed in any real sense. As soon as a call came on a few million in debt servicing that could not be shuffled elsewhere, he was gone. At a systemic level, such a projection was responsible for the idea that the global system had lost $12 trillion because of the 2008 financial crash. In reality, it lost nothing of the sort.

That has always been the disjuncture between a capitalist accounting of the system at any given point and a socialist one. The latter, a materialist analysis, assesses the system at a more modest level at each point, with the aggregate wealth: current assets, replacement cost and projected available labour, modified by reasonable expectations of transformations in labour productivity (an oversimplified version). It’s a more realistic view of how much capacity there is in an economy, and how it is shared. A ‘billionaire’, in hard terms, is worth what they can borrow in hard cash against their assets. That is relevant at the moment because of the increasing role of ‘plutocrats’ in politics, such as Clive Palmer. Palmer spent $12 million on the last election. He is assessed as being worth $700 million. So why not spend $50 million and get six senators, rather than two-and-a-half? Because he doesn’t have $50 million to throw around! He knowingly throws a larger shadow by playing the angles.

So the top end is distorted. And while this may damn how the system distributes wealth, it flatters its productivity. What of the other end? We are routinely told that X billion people live on a dollar a day or somesuch. But of course that is nonsense too. It is a quantification of systems that rely on a mix of direct production, barter and some market relations. It involves an arbitrary valuation of wildly heterogenous uses, with no regard to the satisfaction of human needs, whether basic physiological ones or higher. That is not to get into a romantic paean to village life: such valuations include stable subsistence systems and those that teeter on starvation. But it is to point out the obvious capitalist rhetoric concealed therein – by this measure, to pass from a mixed economy into a capitalist one is an improvement, while in reality it may involve an impoverishment. The village dispersed, its people drifting to the city and earning $4 a day, which is eaten up by basic costs, have, by this logic, increased their wealth fourfold.

That there has been a powershift in the global prospects of the poor over recent decades is undeniable. But that has been a qualitative shift – a political one – to do with the failure and collapse of socialist models and the absence of a socialist prospect. In that vacuum, a wild rhetoric of capitalist productivity has become the dominant motif.

Yet, a glance around our cities and lives shows the opposite: real accumulation in the West slowed in the 1970s and has not revived since. The increased share that the rich cream off in terms of luxuries is galling, but it does not even begin to fill the gap between projected wealth and absent development. Nor can the extra power the super-rich gain from projected wealth be denied. But that is no reason to magnify it by confirming its rhetoric, or to damn the global power as abject by a false accounting. They have more power than such accounting allows for – which is precisely why such a version of the world is allowed to circulate endlessly.

Guy Rundle

Guy Rundle is currently a correspondent-at-large for Crikey online daily, and a former editor of Arena Magazine. His ebook, And the Dream Lives On? Barack Obama, the 2012 Election and the Great Republican Whiteout, is forthcoming.

Overland is a not-for-profit magazine with a proud history of supporting writers, and publishing ideas and voices often excluded from other places.

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  1. When I last checked, Gina Rinehart was ‘worth’ $29.17 billion, making her the richest woman in the world.

    But what does that equate to in real terms. Can anyone spend their way through $29.17 billion? Buy the most expensive house in Sydney? It would only set her back 100 million. Ten such, variously located, only one thirtieth of her net ‘worth’. Limousines, planes, yachts etc: etc, call for more loose cash; no more. Staff for all of the above, some more. Staff to manage the staff, a bit more still.

    What Rinehart actually did was move to silence critics and head off public controversy regarding her wealth and business dealings. She has sought (so far without success) to take over Fairfax. (Ironically the Fairfax mansion in Sydney was recently top of the valuations at 100m.)

    It is one thing to make your money. But then you have to spend money guarding it.

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