How to Tax a Billionaire (or Not)

Our institutions created centibillionaires and are now trying to contain them.

In Ayn Rand’s novel Atlas Shrugged, a group of high-achieving industrialists have had enough with being exploited (in their view) by “parasitic” collectivists and “second-handers”. They withdraw to a perfect community Galt’s Gulch aka Atlantis where they can live in peace and prosperity with each other, far away from the do-nothing (in their view) populace and according to their own laws and beliefs.

Because Rand mercifully never wrote a sequel (the original has more words than either War and Peace or Les Misérables), it is not clear whether these supermen and women lived happily ever after or whether, after enjoying the initial high of sticking it to humanity, their infinite egos led them to devour each other to oblivion and Galt’s Gulch disappeared Roanoke-like with no explanation left for posterity. That is, no explanation other than the obvious which is that a healthy society requires a fuller range of social strata and cultures, not only a super-stratum and a monoculture, in order to survive and to prosper.

No escape to Galt’s Gulch is currently offered to today’s billionaires who have so far opted to remain in the real world though they contend daily with insults and attacks from many quarters. It is necessary to say “so far” because some have been toying with otherworldly escapes, be they monetary via cryptocurrencies or interplanetary via emigration to planet Mars. Cryptos would free them from the gravity of central banks. And space from the gravity of Earth. After all, in our culture, “to leave it all behind” is nearly synonymous with high quality living. And to disrupt, to reject the dominant paradigm, are seen as ways to create new wealth.

Bernie vs. Billionaires

While still among us on earth however, even the ultra rich deserve… empathy. Or at least some recognition for their achievements. Their defining characteristic, shorn of all social and economic artifice, remains their humanity, not their wealth. Yet it is assumed by the angry-egalitarian political complex that it is fine to insult and harass a billionaire, as if their humanity was inversely proportional to their wealth. Starting with Bernie Sanders for example, some members of Congress have stated plainly that “billionaires should not exist”.

Because there are among the people mob inciters who amplify their message through social media, this slogan could be interpreted as incendiary, or as unsafely ambiguous. Does ‘billionaires should not exist’ mean that we should tax them until they are no longer billionaires? That would entail taking away 99% of some billionaires’ wealth. Or does it mean that we should limit their growth plans when their wealth hits the $999 million mark? Or force them to give away their wealth to charity? Or something else?

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Update: Working Age Population Around the World 1960-2050

This is an update of a similar post from 2015. The UN projections have changed but only by small numbers. The main observations are the same as six years ago (click table to enlarge in a new tab).

The working age population (WAP, those aged 15 to 64) of sub-Saharan Africa continues to grow rapidly. It has more than doubled since 1990 from 252 million to 609 million, and is expected to more than double again by 2050 to 1.3 billion. If the reality turns out to be anywhere near these projections, it will be a significant challenge for African economies to absorb and to employ productively this enormous amount of new human energy.

India faces a similar challenge with its WAP growing from 928 million now to 1.1 billion in 2050. Though daunting, this represents a slowdown in the rate of growth from the previous thirty-year span 1990-2020.

The WAP of Europe, China and Japan have already peaked and will be declining for the rest of the century, per UN projections. Europe’s decline from near 500 million in 2005 to a projected 407 million by 2050 is mainly due to eastern and southern Europe. The WAP of France and the United Kingdom will flatline to 2050 while those of Germany and Russia decline.

In the United States, the steady growth in the WAP between 1960 and 2005 combined with a falling dependency ratio to fuel strong economic conditions. Growth in the WAP is expected to be more muted in the decades ahead.

Compared to the late 20th century and the first decades of this century, the future growth in the WAP will taper off or even turn negative in several regions and countries. Sub-Saharan Africa stands out as the exception that will maintain strong WAP momentum through at least 2050.

Lebanon in Crisis, with Joe Issa El Khoury

“Historically, Lebanon prospered as a result of inflows of people and funds – people who came to take refuge in Lebanon and also funds. If we look at the post World War 2 period when modern Lebanon became independent and also at previous periods that Lebanon went through – and I mean over the past 100 or 200 years – one thing that was common to all these eras is its liberal economic system that was adopted by all who lived on this land. The constant was the liberal economic system.”____ Joe Issa El Khoury

Sami J. Karam speaks with Joe Issa El Khoury, a Beirut-based financier, about the tragic events that have unfolded in Lebanon since 2019. A sharp fall in the currency, a banking freeze, a political crisis, hyperinflation, and widespread street protests made 2019 a difficult year. But these events were then compounded by the Covid-19 pandemic and the explosion in the port of Beirut in 2020.

Issa El Khoury explains the sequence of events that led to the present, and offers a possible way forward.

Topics include:

  • 0:00 Introduction of Joe Issa El Khoury
  • 2:25 What is it like right now on the ground in Beirut?
  • 8:33 Why did Lebanon have a golden period in 1945-75; why was it later so prone to crisis?
  • 17:40 The Rafik Hariri era and the return of growth 1990-2005
  • 20:00 What explains the weakness of the Lebanese state: geography and demographics
  • 26:30 Lebanon’s diversity as a source of wealth; Example of Lebanese cuisine
  • 30:40 Crossing the line from a laissez-faire economy to a crony economy
  • 35:05 The real estate boom of 2007-11
  • 36:55 The impact of the Syrian civil war
  • 39:10 Crowding out the private sector
  • 44:10 The proximate factors that led to the meltdown
  • 46:15 The current condition of the banking sector; Role of the Central Bank
  • 51:00 Will depositors suffer a haircut? The Lazard and other plans
  • 54:45 Talk of privatization of state assets
  • 59:45 Political patronage in the public sector
  • 1:01:50 “All roads lead to Washington DC and the acronym IMF”
  • 1:05:20 Political reform and the role of the diaspora

TO HEAR THE PODCAST, CLICK HERE OR ON THE TIMELINE BELOW:

The Boom in Certainty

Sinclair Lewis called it “the sedate pomposity of the commercialist”. Now it has spread to many parts of society, not always in its sedate form.

Back in our final days as architecture students in Austin, our class had a farewell gathering with a professor who had been a valued mentor to several of us. As was habitual on such occasions, the professor was discussing with us the work of various architects when the subject of a newly-constructed building came up.

“I hate that building”, one classmate said flatly.

After an awkward silence, the professor mocked: “you mean, strongly dislike?” Off guard, the offending party protested that his use of the word was innocuous then and there. The professor conceded as much but explained that it was a visceral word, the kind of word that forestalls further discussion and that hardens the speaker’s and listener’s opinions. It is difficult to walk back or to change your mind from “hate”, and easier to do so from “dislike” or even from “strongly dislike”, he argued. His advice was to leave in one’s words an open path for retreat, in essence to never burn one’s rhetorical bridges.

This led to another discussion about certainty and about people who speak with certainty. The professor said that he had a reflexive dislike for certainty and that he felt a profound distrust towards people who speak with certainty. There is very little that is certain in life, he said, even among things of which we are convinced at a given point in time. Opinions change, science changes, research advances. New discoveries change our beliefs. Knowledge doesn’t just flow or evolve gradually like a river; it shifts laterally and sometimes suddenly like an earthquake.

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Florida in the Election

A French version of this article appears in L’Express.

Former mayor Mike Bloomberg has announced that he would spend as much as $100 million of his own money to help Vice-President Biden prevail in Florida on Election Day. This underscores once again the importance of Florida in this and every presidential contest.

Florida has a good track record of picking the winner in a presidential election. With the messy 2000 contest between George W. Bush and Al Gore, the state gained prominence as the ultimate prize and must-win battleground. To be sure, it is not a perfect track record, given that Florida favored George H. W. Bush in 1992 and Richard Nixon in 1960 over winners Bill Clinton and John Kennedy. If you go to earlier times, you also find that Floridians misfired with John Davis and James Cox in 1924 and 1920, two unknowns today except among aficionados of electoral history. But in sum, four misses out of 25 elections over a century can indeed be called a strong track record.

The stakes are high in 2020 given the state’s 29 Electoral College votes and the tightness of the race according to the polls. Vice President Biden is now nominally ahead by 1 to 3%, an insignificant gap that can easily close or widen in the remaining days of the campaign, depending on a slew of factors, not least the performance of each candidate in the upcoming debates.

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