There’s Nothing Wrong With Billionaires. We Could Use a Few More.

Why Alexandria Ocasio-Cortez is wrong about the wealthiest of the wealthy.
February 7, 2019
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(Illustration by Hannah Yoest / photo credit: GettyImages)

Lots of conservatives are annoyed by Alexandria Ocasio-Cortez but I quite like her. She’s a late-night college bull session come to life, saying out loud all the things that wiser, more-experienced progressive politicians only think to themselves. Her latest foray into morality and economics is a great example of this:

“But I do think a system that allows billionaires to exist when there are parts of Alabama where people are still getting ringworm because they don’t have access to public health is wrong. And I think it’s wrong that a vast majority of the country doesn’t make a living wage, I think it’s wrong that you can work 100 hours and not feed your kids. I think it’s wrong that corporations like Walmart and Amazon can get paid by the government, essentially experience a wealth transfer from the public, for paying people less than a minimum wage. And it not only doesn’t make economic sense, but it doesn’t make moral sense and it doesn’t make societal sense.”

This statement has already been fact-checked within an inch of its life, much to the annoyance of Ocasio-Cortez fans. The Washington Post gave the last four claims three Pinocchios. Ocasio-Cortez herself corrected the first claim about “ringworm” in Alabama, clarifying that she really meant hookworm. As it turns out, even that claim is questionable.

But even if all her her factual claims were true, her conclusion that billionaires are somehow immoral is not.

First, she’s committing a basic logical error by conflating productivity and consumption. “Billionaires control lots of assets. Some people don’t have enough to eat. Therefore billionaires are immoral.” That might sound truthy, but it’s not a valid syllogism. There is a practical limit to individual consumption. Someone worth $50 billion probably has a lifestyle that is largely indistinguishable from someone who’s worth $50 million.

This seems like a minor quibble but it’s a key point. Most progressives imagine billionaires as a sort of Scrooge McDuck character with a swimming pool full of money. In Western democracies, at least, nothing could be further from the truth. Billionaires are, typically, people who control vast wealth because they have produced vast wealth. The vast majority of their wealth isn’t the result of income, it’s often the result of unrealized capital gains. For the most part, billionaires don’t consume their wealth, they manage it.

In other words, most billionaires are billionaires because they have started or invested in highly successful companies that produce very useful and valuable things. They are, in effect, asset managers who are extremely good at managing a small chunk of the economy. Warren Buffet is worth $85 billion but lives in a house that’s worth $625,000. While that’s an extreme example, the principle is the same. Michael Bloomberg is worth $48 billion because he owns 88 percent of a company he founded in 1981. While he has a more extravagant lifestyle than Warren Buffet, he is, far and away, primarily a creator of economic goods rather than a consumer of them. Taxing billionaires out of existence means removing them from their roles as asset managers precisely because they are very good at it. In many cases, by forcing them to liquidate their assets, it would also mean effectively kicking them out of the companies they have created just as their vision is starting to come to fruition.

The point here is that billionaires make everyone richer. Does even the most progressive progressive imagine that the government could have created Amazon or Apple? Eliminating billionaires in the name of “social justice” would be a disaster for everyone, including the people who are supposedly being helped.  Reed Hastings, the co-founder and current CEO of Netflix is worth $3.7 billion. A Netflix subscription costs $8.99 a month and gives you access to tens of thousands of hours of on-demand programming. In a sense, that makes a working family struggling at the poverty line more wealthy, at least when it comes to entertainment, than the richest person on earth 15 years ago when such a thing didn’t exist. You would be hard-pressed to find any government poverty-reduction program more effective than that.

Back in those college bull sessions, it was all very satisfying to dream of fighting injustice and the answers seemed so obvious. And, equally obviously, the only reason our simple solutions weren’t being implemented was because of a corrupt system. But our answers were simplistic rather than simple. Life – and effective policies – are more complicated than we imagined in our naivete. So it is here. Billionaires aren’t immoral. For the most part, they are the geese that lay the golden eggs. The idea of serving them up on a platter may sound crowd pleasing, but provides no benefits to anyone.

There is hope for Alexandria Ocasio-Cortez. She’s had the misfortune to be thrust into the national spotlight while still suffering the jejunity of inexperience. But she’s neither stupid nor foolish. As reality filters into her unalloyed, idealistic world view, who knows what she might become? Perhaps, someday, she’ll evolve into the Daniel Patrick Moynihan of her generation. Given the millennial love of irony, this is probably more likely than you might think.

Chris Truax

Chris Truax is an appellate lawyer in San Diego.