13 August 2010

Did you see that someone has apparently just paid £140 million for a flat in London? The identity of the buyer isn’t known, but somehow I suspect it isn’t one of the 40 American billionaires who promised the other day to give away at last half of their fortunes.

Mind you, if you’re a multi-billionaire, £140 million isn’t such a huge amount to pay for a nice penthouse apartment with a decent view.

The problem with these numbers is that the words “million” and “billion” are so similar. They disguise the fact that for, say, Bill Gates (total wealth estimated at $53 billion), buying that London pied-à-terre would represent an outlay of less than half of one per cent of his total fortune.

(Someone in the BBC newsroom wrote in a headline a couple of days ago that a Whitehall department was planning to cut two billion pounds from its nine million pound budget. It’s an easy mistake to make …)

So let’s talk numbers. How does someone amass so much money that they can afford to give away tens of billions and still have more than the rest of us can even dream of?

I’ve done a rough analysis of those 40 “philanthro-capitalists”. Sixteen of them are bankers, investors or financiers – in other words, they have made their money from money. Five of them (including Bill Gates and Paul Allen of Microsoft, Irwin Jacobs of the wireless technology company Qualcomm, and Jeff Skoll of eBay) got rich from computing and information technology. There’s a sprinkling of property tycoons and a handful of media barons (Michael Bloomberg and Ted Turner, for example).

In most cases, their wealth stems largely from the value of the shares they own – or owned – in the companies they have created. They haven’t stolen it from anyone; you could argue that they have created the wealth by their own ingenuity and acumen – and our pensions probably depend at least in part on the aggregate value of the shares in their companies.

Even so, some commentators feel uneasy about the fact that it is possible for these billionaires to become so unimaginably wealthy. Writing in the New Yorker, James Surowiecki wrote: “Between 2002 and 2007 … the bottom ninety-nine per cent of incomes grew 1.3 per cent a year in real terms -- while the incomes of the top one per cent grew ten per cent a year. That one per cent accounted for two-thirds of all income growth in those years.”

And Peter Wilby in The Guardian expressed concern that very rich people could now be having a hugely disproportionate impact on which good causes are adequately funded and which are not. “If the rich really wish to create a better world, they can sign another pledge: to pay their taxes on time and in full; to stop lobbying against taxation and regulation; to avoid creating monopolies; to give their employees better wages, pensions, job protection and working conditions …”

I suspect most people would argue that billionaires who are generous are far better than ungenerous ones. The instinct to share one’s good fortune is surely preferable to miserliness. (After all, all the major religions emphasise the importance of charitable giving.)

The American dream tradition depends on a belief that anyone, no matter how humble or disadvantaged their origins, can aspire to wealth and happiness. The question that’s being asked – and I take no position on this – is whether at some point too much wealth becomes somehow undesirable rather than desirable.

Is the distribution of wealth as important to the well-being of a society as its accumulation? What’s preferable: to allow a handful of very rich people to decide what should be done with that wealth, or for them to pay more in taxes to government, so that governments can make the decisions about redistribution, poverty alleviation, medical research and so on?

As always, I’d be interested in your thoughts.