Paul Krugman: America is not waiting for a billionaire to come to the rescue

(John Locher | AP file photo) Former New York City Mayor Michael Bloomberg speaks at a news conference at a gun control advocacy event in Las Vegas on Feb. 26, 2019.

Immense wealth isn’t good for your reality sense.

Billionaires aren’t necessarily bad people, and most of them probably aren’t. However, some are, and my unscientific sense is that billionaires are more likely than the rest of us to exhibit bad judgment warped by runaway egos, especially in the political sphere.

It’s not hard to see why: Great wealth attracts people eager to tell an extremely rich man (or woman, but political egotism is mainly a male thing) what he wants to hear. In the political arena this means telling billionaires both that their lavish financial rewards are a mere fraction of the vast contribution they have made to society, and that the public is clamoring for them to take their rightful role as leaders.

Put it this way: These days, many political factions are accused, with varying degrees of justice, of living in some kind of bubble, out of touch with American reality. But few live as thoroughly in a bubble as the billionaire class and its hangers-on.

And now the billionaires in the bubble find themselves in an environment in which concerns about soaring inequality, about the extraordinary concentration of wealth in the hands of the few, finally seem to be getting political traction. And they’re not handling it well.

Obviously I’m going to get to Michael Bloomberg in a minute. First, however, let me talk about the economics and politics of billionaires in general.

So, do billionaires in general make vast contributions to society? To make that case, you don’t just have to argue that they’ve earned their wealth by doing productive things. You have to argue that their wealth is just part of what they’ve added to national income.

And that’s a hard argument to make when you look at how most billionaires have made their money. After all, many of them struck it rich in finance and real estate.

Now, not that long ago the world economy was brought to its knees by the collapse of a huge real estate bubble, which destabilized a financial system that had been drastically weakened by “innovations” that supposedly made us richer — and that certainly enriched some wheeler-dealers — but that had, it turned out, greatly increased the risk of crisis. Do you really want to make the case that financial industry billionaires have been great benefactors?

The next biggest group of billionaires, by the way, made their money in fashion and retailing. Technology comes in only fourth — and as anyone following the news knows, some serious questions exist about the extent to which big fortunes in tech are modern versions of the monopoly spoils grabbed by old-fashioned robber barons.

It’s also worth noting that the U.S. economy used to get along fine without nearly as many billionaires as it has now.

American economic history since World War II falls fairly neatly into two halves: a first era, ending roughly in 1980, during which progressive taxation, strong unions and social norms limited extreme wealth accumulation at the top, and the era of soaring inequality since then. Did the new prosperity of plutocrats “trickle down” to the nation as a whole? Not according to any measure I know. For example, “multifactor productivity,” the standard economic measure of technological progress (don’t ask), has risen only half as much since the 1980 turning point as it did in the previous era.

What about politics? Many people on Wall Street and a significant part of the punditocracy are socially liberal but economically conservative, or at least leaning that way. That is, they are for racial equality and LGBTQ rights but against major tax increases on the wealthy and big expansion in social programs. And that’s a perfectly coherent point of view.

Inside the billionaire bubble, however, people also imagine that it’s a view with broad popular appeal. Well, it isn’t. Most people, including many self-identified Republicans, want to see higher taxes on the rich and increased spending on social programs; however, quite a few people combine these sentiments with racial hostility and social illiberalism, which is why they seem to vote against their own economic interests.

As best we can tell, the constituency for social liberalism plus fiscal conservatism comprises only a few percent of the electorate. When Howard Schultz — remember him? — ran that combination up the flagpole to see if anyone saluted, only about 4% of voters approved. And early indications don’t show Bloomberg doing much better, even though as someone who successfully ran New York he has a much better case to offer.

I’m not saying that the U.S. public is necessarily ready for the likes of Elizabeth Warren or Bernie Sanders. I worry in particular about the politics of Medicare for All, not because of the cost but because proposing the abolition of private insurance could unnerve tens of millions of middle-class voters.

But the idea that America is just waiting for a billionaire businessman to save the day by riding in on a white horse — or, actually, being driven over in a black limo — is just silly. It is, in fact, the kind of thing only a billionaire could believe.

Paul Krugman

Paul Krugman, winner of the Nobel Memorial Prize in Economic Science, is an Op-Ed columnist for The New York Times.

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