Sorry Claudia, billionaires have the right to exist

At the heart of Claudia Webbe’s recent tweets, where she stated that ‘every UK billionaire should be brought before a Public Inquiry to be held accountable for their wealth’ lies the dangerous fallacy that creating wealth is a zero-sum game.

Claudia claims that ‘if you cannot afford to ensure the workers that make your goods are paid at least a living wage, your business model is based on exploitation.’ There are a lot of issues with this statement. Firstly, what constitutes a ‘living’ wage? 

It is possible to live in a cave, without electricity or the delights of modern capitalism. Whilst humans did so for thousands of years and it would not be difficult to do so on minimum wage, I highly doubt Webbe would consider this ‘living’. All that is to say that what constitutes a ‘living’ wage is completely arbitrary.

More importantly, she is wrong in saying that business models that don’t live up to her standards of delivering a ‘livable’ wage are exploitative. Her tweets show that she arrived at this conclusion by judging how much ‘hard work’ workers put in. “Billionaires do not work harder than nurses,” she claims, then using this to justify her belief that billionaires do not deserve their wealth. 

Though here’s the thing: under capitalism, you are not rewarded for how much ‘hard work’ you put in, you are rewarded, through others voluntarily trading with you, for how much value you create. Elon Musk did not work millions of times harder than nurses, but he did create a product that has transformed millions of lives whilst promising to reduce air pollution. On the other hand, I would ‘work hard’ by breaking rocks all day but that would create very little value.

That is not to say the work of nurses, doctors, and supermarket workers has no value. On the contrary, I am extremely grateful to live in a country where we do have access to excellent healthcare and education. But wages should always be set according to supply and demand and there is nothing wrong with doing so.

At their core, prices are information signals. Thomas Sowell, in his book Basic Economics, very clearly demonstrates the implications of attempting to fix prices artificially high or low through price controls and taxes: it always distorts the efficient allocation of resources, as we’ve seen with the recent energy price cap.

Furthermore, to offer a job cannot be ‘exploitation.’ You are not forced to work for any company so people only do so as it benefits them. If you choose you do not want to live by growing your own food directly, you can obtain it by creating value in other ways then trading. The same is true for healthcare, education, and everything else. There is nothing ‘exploitative’ about that.

A claim I hear over and over again is that billionaires shouldn’t exist and the state should redistribute their wealth because the marginal utility of an extra Pound is higher for those at the bottom than those at the top. When examined more closely, I do not think this argument holds up.

It’s important to understand that most of the wealth owned by billionaires is speculative and illiquid. It is composed mostly of shares and real estate whose value is constantly fluctuating, and it is difficult to capture this, hence why many countries including France have abandoned their wealth taxes. What do advocates of wealth taxes propose? Seizing these assets and selling them off? Transferring these shares to poorer people? This would merely result in corporations becoming more badly run and would be a massive disincentive to investment.

Furthemore billionaires don’t just hold their money in a vault (though if they do, it’s their right). Many will reinvest it into other businesses, furthering innovation and creating more wealth. In addition to the direct benefits and jobs that are created, the resulting innovation overwhelmingly helps the poor. The invention of domestic appliances, to take one example, freed up the leisure time of the poor then created plenty of activities with which to fill that free time. But investment takes time and it takes money, and nobody spends their own money more wisely than themselves. The critics of billionaires should focus on the end result, not ideology.

To say that the rich are rich because the poor are poor is as wrong as saying that the healthy are healthy because the unhealthy are unhealthy. It’s just not true. I suggest that in 2022, Webbe reads a little more David Ricardo and a little less Karl Marx.