Billionaires’ Economics Impact: Net Positive or Loss?
Due to COVID-19’s immense impact on the world economy, ordinary citizens and economists alike are looking for definitive signs that the world has gone back to normal. Catering to this hope, numerous news headlines describing how the “US GDP has returned to pre-COVID levels” (Center on Budget and Policy Priorities, 2022) have been lauded as proof of the US’ strong economic recovery. However, statistics from Oxfam International show the reality behind the US’ GDP growth: a new billionaire was created almost every 30 hours during the pandemic (Oxfam International, 2022). The fact that regular Americans were not the ones driving this economic growth raises an important question: do billionaires positively or negatively affect the rest of society?
A simple answer would be that as long as it isn’t directly hurting other citizens, a billionaire’s wealth isn’t harmful. Even this basic idea is heavily debated – many say the mere fact that billionaires are able to garner such wealth is disadvantaging middle and lower-class citizens. Others, however, argue that billionaires “don’t steal the wealth of the public” (Costa, 2021) because our economy isn’t a zero-sum game where a few individuals gain wealth while others directly lose it. Instead, when billionaires are either personally innovating or pouring capital into smaller start-ups, they are helping to enrich the lives of their employees while accumulating wealth for themselves. This argument states the inequality between billionaires and the working class doesn’t have to be exploitative as the invention of more affordable and efficient commodities improves society as a whole, helping everyone to prosper.
Following this line of reasoning, billionaires are positively impacting the communities around them by creating jobs and wages that otherwise wouldn’t have existed. Because of the opportunities that billionaires are able to provide to regular Americans, their wealth shouldn’t be seen as exorbitant or negative but rather as a benefit for having improved others’ quality of life and an incentive for other individuals to innovate as well.
Other economists, however, disagree and contend that the extraordinary wealth of billionaires is stolen from their workers as they would have never become so rich without the time and effort of their employees. An advocate for this idea, Economics Professor Richard D. Wolff at the University of Massachusetts Amherst claims that workers are paid a wage that is less in value than the worth that they are directly bringing in for their company (Dilawar, 2019). Billionaires, he says, pocket the difference between what a worker should be earning for the profit they are generating and their actual salary, allowing them to become exponentially wealthier while their employees don’t see actual increases in their incomes after adjusting for inflation (DeSilver, 2020).
A prime example of this theory is Amazon and its founder, Jeff Bezos. While Jeff Bezos makes around 6 billion dollars a month (O'Connell, 2021), thousands of Amazon workers are forced to rely on food stamps and other forms of government assistance in order to survive. Amazon’s warehouse workers contribute so much to the company that it wouldn’t be able to function without their work; however, the profit from their work goes to Bezos rather than the workers generating it. While it’s reasonable to assume that billionaires like Bezos should be rewarded for creating such a popular product and company that is driving the economy, should it really be funded on the backs of hardworking Americans that are hardly paid a livable wage?
Amazon, in particular, receives numerous, large subsidies from the US government in order to help its warehouses and, in turn, its workers (Thomas et al., 2022). However, since that money isn’t put toward Amazon’s employees, they are forced to turn to the government to survive. While it is true that workers having jobs is better than being unemployed, American taxpayers are now paying for the welfare of Amazon workers when that burden should be placed on the company itself.
By the end of 2020, Amazon’s profits and stock price had increased by around 56% and 70%, respectively. A report by the Brookings Institute found that Amazon, having gained massively through the pandemic, could have multiplied its workers’ compensation four-fold and still have made a larger profit than it did in 2019 (Kinder et al., 2021). However, their workers’ wages had only increased by about 7% over the year, even when taking into account December bonuses. Paying their employees a living wage wouldn’t be so devastating for Amazon that it would put them out of business: they would just earn a smaller profit than they could when exploiting their workers. This scenario is being replicated many times over by companies like Walmart and McDonald's who exploit their employees by denying them fair compensation for the value their labor generates, driving them to rely on government assistance.
Another way billionaires are able to stay afloat and accumulate wealth is by using government funds and resources (e.g. Elon Musk Tesla receiving carbon credits). Since billionaires utilize government services - similar to how regular American citizens pay taxes to use government-funded roads and schools - they should be responsible for giving back a fraction of their yearly earnings via taxes. Billionaires and other members of the top 1%, however, are paying around 30 percent less tax than they should be (Alstadsæter et al., 2018). This lost revenue for the government could be spent on improving schools, hospitals, and Americans’ quality of life; however, it has just been used to help the uber-rich hoard wealth. While it may be true that, in theory, billionaires can positively impact society this doesn’t seem to be the case in practice.
It is difficult to definitely declare that billionaires are “stealing wealth”, though, as different economic perspectives and analyses will lead to different conclusions. However, it is true that many billionaires’ wealth is earned at the expense of others in society. This in no way implies that billionaires shouldn’t exist as they have definitely improved the standard of living for many. But as billionaires have experienced meteoric growth throughout the pandemic, a million people could fall into extreme poverty in 2022 (Oxfam International, 2022).
It is imperative that the US government reform its tax code to close down both legal and illegal loopholes that allow billionaires and their corporations to elude paying taxes in proportion to their immense wealth. This revenue should be put toward improving social goods so that average citizens- not just the uber-wealthy- can benefit from the extreme influence and power given to billionaires. However, many conservative economists oppose this idea, saying that the market will fairly distribute the impact of billionaires. Additionally, they claim that government intervention would squander the incentives billionaires have to do goodwill.
There is no easy answer to this issue, but it is evident that under the current organization of our economy, billionaires are benefiting exponentially more than middle and lower-class Americans. The specifics of the debate on the social impact of billionaires, however, will continue.
Edited by Lola Cleaveland
Works Cited
Alstadsæter, A., Johannesen , N., & Zucman , G. (2018, October 23). Tax evasion and inequality. Retrieved December 29, 2022, from https://www.elboletin.com/wp-content/uploads/2017/10/gabriel-zucman.eu_files_AJZ2017.pdf
Chart book: Tracking the recovery from the pandemic recession. Center on Budget and Policy Priorities. (n.d.). Retrieved December 28, 2022, from https://www.cbpp.org/research/economy/tracking-the-recovery-from-the-pandemic-recession
Costa, N. (2021, April 14). The economics of billionaires. Michigan Journal of Economics. Retrieved December 28, 2022, from https://sites.lsa.umich.edu/mje/2020/11/17/the-economics-of-billionaires/
DeSilver, D. (2020, May 30). For most U.S. workers, real wages have barely budged in decades. Pew Research Center. Retrieved December 28, 2022, from https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
Dilawar, A. (2019, February 7). Amazon is the best argument against capitalism. Pacific Standard. Retrieved December 28, 2022, from https://psmag.com/ideas/amazon-is-the-best-argument-against-capitalism
Kinder, M., Stateler, L., & Du, J. (2021, November 2). Windfall profits and deadly risks. Brookings. Retrieved December 28, 2022, from https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/
O'Connell, O. (2021, October 13). How much does Jeff Bezos make per minute? The Independent. Retrieved December 28, 2022, from https://www.independent.co.uk/news/world/americas/jeff-bezos-make-per-minute-net-worth-b1887310.html
Pandemic creates new billionaire every 30 hours - now a million people could fall into extreme poverty at same rate in 2022. Oxfam International. (2022, May 23). Retrieved December 28, 2022, from https://www.oxfam.org/en/press-releases/pandemic-creates-new-billionaire-every-30-hours-now-million-people-could-fall
Thomas, K. P., Tarczynska, K., Martinez, A., Wen, C., & LeRoy, G. L. R. (n.d.). Amazon.com’s hidden worldwide subsidies - good jobs first. Retrieved December 29, 2022, from https://goodjobsfirst.org/wp-content/uploads/2022/07/Amazon.coms-Hidden-Worldwide-Subsidies.pdf
