If you don't know Nick Hanauer by name, you know his work: About two decades ago he was the first non-family-member investor in Amazon. He's referred to himself as part of the .01 percent — even richer than the regular old 1 percent. He's also labeled himself a plutocrat, someone who has power because of their wealth.
Hanauer is keenly aware that he is on the fortunate side of America's wealth gap ("Truly, my success is the consequence of spectacular luck, of birth, of circumstance and of timing," he said in 2014 TED Talk); a crisis that he says is "the direct result" of a "moral failure."
"I am a practitioner of capitalism," Hanauer writes in Oxfam's state of wealth inequality report published Monday. "The most important lesson I have learned from these decades of experience with market capitalism is that morality and justice are the fundamental prerequisites for prosperity and economic growth.
"Greed is not good," continues Hanauer, who is a signer of The Giving Pledge, an elite philanthropy circle co-founded by Warren Buffett and Bill Gates. "The problem is that almost every authority figure — from economists to politicians to the media — tells us otherwise. Our current crisis of inequality is the direct result of this moral failure."
In the Oxfam report, "Public Good or Private Wealth?" which was released as some of the biggest names in finance convened in Davos, Switzerland for the World Economic Forum, Hanauer says the path the world is on will lead to chaos for everyone.
"This exclusive, highly unequal society based on extreme wealth for the few may seem sturdy and inevitable right now, but eventually it will collapse," writes Hanauer. "Eventually the pitchforks will come out, and the ensuing chaos will not benefit anyone — not wealthy people like me, and not the poorest people who have already been left behind."
Indeed, the inequality Hanauer speaks of is getting worse. The richest 26 people currently own the same wealth as the poorest half of the world, according to the report from charity Oxfam. The collective fortunes of the world's billionaires rose by 12 percent in 2018 — or $2.5 billion each day. At the same time, the wealth of the poorest half of the global population fell by 11 percent last year, Oxfam says.
To counteract the extreme wealth inequality currently being accelerated by capitalism, the richest must pay "their fair share of tax," which is not happening, according to the report.
In recent decades, tax rates for wealthy individuals and corporations have been reduced around the world, the report finds. In particular, the Oxfam report calls out the tax laws in the United States.
"The recent US tax law is a master class on how to favor massive corporations and the richest citizens," Paul O'Brien, Oxfam America's Vice President for Policy and Campaigns, writes in a statement accompanying the report. "The law rewards US companies that have trillions stashed offshore, encourages US companies to dodge foreign taxes on their foreign profits, and fuels a global race to the bottom that benefits big business and wealthy individuals at the expense of poor people everywhere."
To Hanauer, wealthy people and companies paying less taxes whether through tax reform or tactics is a culturally accepted agenda based on flawed thinking.
"There can be no moral justification for this behaviour beyond the discredited neoliberal dogma that if everyone maximizes their selfishness, the world will somehow be a better place," Hanauer writes. "It has no economic justification, either. In fact, it is economically self-defeating, as the ordinary people who drive a prosperous economy are instead impoverished in favour of the bank accounts of billionaires."
The idea of raising tax rates on the wealthy has gotten a flurry of attention recently.
Newly elected Rep. Alexandria Ocasio-Cortez, D-N.Y., has proposed a 70 percent tax rate on earnings above $10 million. Scott Minerd, global chief investment officer for $265 billion Guggenheim Partners, said in an interview with CNBC that the idea of such a tax is "scary."
Billionaire hedge fund guru Ray Dalio said in November that capitalism is not working for the majority of people, but he says there could be unintended consequences to the tax rate suggested by Ocasio-Cortez. "If we're to have a 70 percent marginal tax rate, most individuals affected by it will calculate whether they should instead operate as a corporation in order try to convert ordinary income to capital gains, so I wonder how that will be handled," Dalio told CNBC in Davos. "And I wonder what will be done to influence whether capital will leave the country."
Hanauer says taxing the wealthy "fairly" is necessary.
"Today's neoliberal orthodoxy teaches us that inclusion and justice are luxuries. That health and education should be left to the mercy of the free market, available only to those who have the money to pay for them. That ever-lower taxation on the richest will only benefit economic growth. But this view is wrong and backward," Hanauer writes in the Oxfam report.
"Ultimately it is our humanity, not the absence of it, that is the true source of economic growth and a flourishing civilization. This is not just an imperative for activists and academics but for all of us — including every billionaire. It is not a question of whether we can afford to do this. Rather, we cannot afford not to."
See also:
Ocasio-Cortez's 70% tax plan gets fierce response, but even Warren Buffett says rich should pay more
Hedge fund billionaire Ray Dalio: 'Capitalism basically is not working for the majority of people'
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