On Wednesday, the second day of the elite World Economic Forum in Davos, Switzerland, a group called Patriotic Millionaires published an open letter, “Millionaires Against Pitchforks.”
Signed by 121 wealthy individuals, including former Unilever CEO Paul Polman and Disney heiress Abigail Disney, they call for increased taxes on the rich, themselves included, and cracking down on tax evasion.
While it’s a move in the right direction, slightly higher taxes on the rich will not be enough to address the major challenges of our time; larger changes to our economies are needed.
Tax increases, like Patriotic Millionaire’s previously proposed 10 per cent increase to income taxes of those making over $1 million USD per year, will still allow for more wealth accumulation. That tax increase wouldn’t apply to someone in the top 0.1 per cent by income making $999,999 USD per year.
And on the assets side, taxes on the wealth of the ultra rich would need to be more than what they make on their investments to start reversing accumulation. For example, someone with $10 million dollars in investments can reasonably expect to get a 7 per cent return, meaning $700,000 a year. As long as hefty profits from revenue streams in various sectors of the economy go predominantly to the rich, taxation for redistribution will be a constant, challenging game of catch-up.
At Davos this week, the official social change solution on offer is “stakeholder capitalism.” It is the subject of various workshops, and of the “The Davos Manifesto,” which was titled “Stakeholder Capitalism: A Manifesto for a Cohesive and Sustainable World.”
Instead of companies only being accountable to shareholders, meaning the financial investors, stakeholder capitalism promises to consider a wider range of interests. With capitalism increasingly seen as heartless and environmentally destructive, proponents of stakeholder capitalism hope this marketing exercise lifts the brand.
But stakeholder capitalism and its predecessor, corporate social responsibility, brings no significant shift, especially in terms of who owns and profits off of business activities.
Stakeholder capitalism and slight tax increases on the wealthy are, in effect, a glossy sales pitch to maintain the status quo, with slight concessions made to avoid bigger, more fundamental changes.
Having grown up in a wealthy family and being around wealthy people, I know that the rich will not lead and bring about the changes we need, at least not en masse. Too many wealthy people are complacent in the face of the climate crisis and growing inequality and cling to their high-consuming lifestyles and riches. Just count the number of private jets at Davos.
Changes beyond tinkering will require more democratic control of the economy. For one, that means reversing the trend of privatizing of public services.
Obvious cases include public transit, water, and other utilities. We can also look to jurisdictions where telecoms and insurance remain in the public domain with great results, like in Saskatchewan. We can also remember that much of the oil industry in Canada originated in the public sphere with government investment and was profitable, before being sold off to private investors.
New and bigger workers’ co-operatives and credit unions can also contribute to democratizing our economy.
Wealthy folks really wanting wealth redistributed don’t need to shrug philanthropy off as ineffective, as the Patriotic Millionaires seem to in their letter. While donating to what should be publicly funded services (eg. hospitals, schools) doesn’t do much to drive social change, social justice philanthropy has proven to be an effective approach. It involves funding social movements and causes that push for systemic change and are building new economic models. Giving to these worthwhile causes sometimes means not getting a tax receipt, and that’s OK.
Social justice philanthropy also takes the approach that donors, those with the money and power, should not be the ones deciding what happens with the money. Donors need to trust that those most affected by social ills know best where resources are needed, and how to affect change. This is the approach of some funders supporting, for example, Climate Justice Alliance groups in the U.S., and the Groundswell Community Justice Trust Fund in Toronto.
In summary, taxes are a start, but they are just one tool among many for economic transformation, not the end goal.
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