Straight Dope 2/10/2023: Are billionaires bad for democracy?

Cecil's Columns/Staff Reports
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Are billionaires bad for democracy?

Recent history hasn’t been reassuring, has it? But the question is more complicated than you might think. Let’s break it down.

Are billionaires bad, period? There’s a sizable constituency for this proposition. In the UK, for example, you can find prominent individuals who think billionaires should be hanged. Well, maybe not hanged exactly; the formulation that caught my eye was “shouldn’t be allowed to exist.” Possibly some humane method of euthanasia was contemplated.

However, that wasn’t it either. What Labour MP Lloyd Russell-Moyle actually said during a 2019 BBC radio interview was he didn’t think anyone in Britain should be a billionaire, on the argument that nobody really needed that much money.

There’s no disputing this. However, looking at the matter objectively, I think most fair-minded people would say billionaires – some billionaires, anyway – have social utility. One thinks of Steve Jobs, Bill Gates, Jeff Bezos, Mark Zuckerberg, Elon Musk – these people have changed our world, maybe not entirely for the better, but the printing press wasn’t a 100% boon for humanity either. They surely wouldn’t have done it for free.

One can make the case that having tens or even hundreds of billions of dollars isn’t such a bad thing. Musk built mighty industries out of rocketry and electric vehicles, but subway construction was a bust. A waste of money? Come now – he could afford it, and it was worth a try. At least now we know.

On the other hand, some forms of billionarity ought arguably to be extirpated. Inherited wealth seems like a promising candidate – the Teeming Millions are entreated to read Evan Osnos’s eye-opening New Yorker piece on the Getty heirs. And don’t get me started on cryptobillionairitude. But that’s a column for another day.

Is concentration of wealth bad for democracy? According to one recent estimate, the 728 U.S. billionaires collectively control $4.5 trillion, half again more than the bottom 50% of U.S. taxpayers, who control just $3 trillion. That can’t be good. However, one hesitates to lay the distortions of the body politic evident in our time entirely at the feet of the billionairiat. Globalization, to cite a leading factor, has disproportionately favored the educated and urbane. If you take recent election results as a referendum on satisfaction with the modern world, which appears to be the great divide, the verdict for the past couple decades has been close to 50-50. It’s not just billionaires on one side.

Are some billionaires bad for democracy? We can all think of one individual who’s been working pretty hard at it. But another case is perhaps equally instructive – Peter Thiel, the billionaire co-founder of PayPal, early investor in Facebook, and contributor to conservative politicians, including Donald Trump and, more recently, J.D. Vance.

Thiel, an enigmatic outlier in Silicon Valley, has been freaking people out for years. He was brought to my mind most recently by an opinion piece by Peter Schwartz, who’d worked himself into quite a state:

Thiel believes globalization is the Antichrist, the Antichrist is the antecedent to the Apocalypse foretold in the Book of Revelations and only a turn toward Jesus Christ can save humanity from annihilation … The “Christian statesman or stateswoman,” the audience for which it turns out Thiel is writing, lingers in “the twilight of the modern age, waiting on Christ’s return, for that glorious day when all will be revealed, all injustices will be exposed, all those who perpetrated them will be held to account” … While these Christians wait, they serve as stewards, protecting and healing when they can, killing and destroying when they must … Thiel’s vision … echoes the eschatology of Christian Reconstructionists who believe Christ’s return, following an “Age of Enlightenment,” will require active, and almost-assuredly violent, political intervention.

Jiminy. Schwartz said he’d pulled many of the scare quotes from a 2004 essay by Thiel called “The Straussian Moment” that had become famous in some circles. High time I read it.

I was relieved to discover that while the Antichrist and the Apocalypse were indeed mentioned in this work, they weren’t what it was chiefly about. That said, establishing what it was about took some effort. In the course of 20-some pages Thiel refers to 9/11, George W. Bush, Osama bin Laden, the 17th century philosopher John Locke, the Thirty Years’ War, the Treaty of Westphalia, Milton Friedman, Balzac, Brecht, Pope Urban II, Romulus and Remus, Darwin, Aristotle, Nietzsche, Thomas More, Socrates, Oswald Spengler, The Matrix, and yes, if I read this right, the Second Coming of Christ, all discussed in an opaque, allusive style that leaves you wondering: what is this guy talking about? However, after some study, I’d say the following gives the drift:

  • The 9/11 attack reveals the moral bankruptcy and helplessness of the West’s liberal order in the face of Islamist fanatics, who at least know what they want and are willing to wreak havoc to get it, as opposed to gutless schlubs like us.

  • To avoid annihilation, we need to abandon the philosophical underpinnings of the Republic, which date back to John Locke – you know, all that stuff about the social contract, representative government, and the rule of law – and come up with something more suited to the historical moment.

  • Casting around for something serviceable, Thiel considers three candidate thinkers, all of whom could be charitably characterized as eccentric: the German legal scholar Carl Schmitt, who had been a prominent Nazi; the obscurantist professor of political philosophy Leo Strauss, a favorite of neo-conservatives; and the French historian and philosopher Rene Girard, who taught at Stanford, where he became a mentor of Thiel’s. Girard came up with something called mimetic theory, which I concede on brief exposure has a certain explanatory power but seems a couple precepts short of a philosophy of life. But Thiel, if I understand him correctly – I’m not that confident – believes a mix of Strauss and Girard is the tonic our flabby age requires.

Reactions to “The Straussian Moment” mostly fall into two categories (a) this is deep; or (b) this is dangerous and frightening. But a more sober appraisal would be: (c) this guy needs a hobby. One doesn’t wish to be overly literal, but here was an individual who seemed to think that, to give us the moral clarity needed to defeat terrorism, we should throw out cherished ideals and substitute obscure philosophical concepts you’d need a graduate seminar to understand. This doesn’t seem like an advantageous geopolitical strategy.

Nonetheless, it was clear Thiel had no use for conventional liberalism. He removed any doubt on this score in a 2009 essay called “The Education of a Libertarian”:

I remain committed to the faith of my teenage years: to authentic human freedom as a precondition for the highest good … But … I no longer believe that freedom and democracy are compatible … Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron.

Given these views, you can see why Thiel would be drawn to Trump. Like many, he apparently saw in his fellow billionaire a wrecking ball for the modern world. He spoke at the 2016 Republican convention, donated $1.25 million to Trump’s campaign, and served on his transition committee. He didn’t otherwise have much to do with the Trump administration but in 2022 decided to become a financier of election deniers, contributing decisively to Vance. That netted him one win out of two major political investments (the other was Blake Masters, defeated in Arizona), which any venture capitalist would say wasn’t bad.

So, are some billionaires bad for democracy? No doubt others will put forth their own candidates. But I’d say we have at least two.

Is the present campaign finance apparatus bad for democracy? Here we get to the heart of the matter. According to OpenSecrets, a nonpartisan DC group that tracks federal campaign contributions, the dismantling of fundraising restrictions by Citizens United v. FEC (2010) and other court decisions led to a massive increase in contributions by billionaires. The total amount raised during the 2008 federal electoral cycle, prior to Citizens United, was $5.5 billion, of which just $17 million (0.3%) came from billionaires. In 2018, total campaign fundraising had risen modestly to $6.4 billion, but the billionaire share had shot up 36-fold to $610 million, or 9.6% of the total. Of that number, $124 million had come from a single source, Las Vegas casino magnate Sheldon Adelson and his wife Miriam, and all of it had gone to Republicans. Let’s generously assume the Adelsons weren’t angling to overthrow democracy. Would it nonetheless be reasonable to think their money gave them outsize influence? You bet.

But here’s the thing. Of the total contributions by all billionaires in 2018, 51% had gone to Democrats – and Democrats regained control of the House that year. In 2020, 60% of billionaire contributions went to Democrats, who won the Presidency and both houses of Congress. In 2022, the top 100 Republican donors out-raised Democrats $742 million to $587 million, but the top contributor was billionaire George Soros, whose $179 million to Democrats surely played some role in minimizing what had been expected to be a rout.

Your columnist isn’t so partisan as to presume triumph for Democrats invariably means triumph for democracy. And it would be silly to believe contributions by billionaires were the preeminent factor in swaying the electorate. However, it’s fair to say that, at pivotal moments, a sizable bloc of billionaires, dismayed by the Trumpian drift, piled in on the other side. Wherefore a reasonable conclusion might be: it’s money that’s bad for democracy, not necessarily the people that have it.

– CECIL ADAMS

After some time off to recharge, Cecil Adams is back! The Master can answer any question. Post questions or topics for investigation in the Cecil’s Columns forum on the Straight Dope Message Board, boards.straightdope.com/.

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Billionaires are a natural product of a large economy. Citizens United v. FEC (2010) is not.

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My take on this is not to do with the damage that malevolent billionaires can do to democracy. It’s the marginalisation of the poorest. Whenever someone says, “but people need to be rewarded for taking a risk and creating a business” I tend to agree with them, but not to the ridiculous extent that we see today.

Might it also be argued that these people would have the same social utility if they were merely multi-millionaires?

The gap between the richest and the poorest has been growing and growing to an extent beyond parody. The poorest people already feel like they don’t have an equal stake in democracy. This I believe will continue to grow as the rich/poor gap continues to broaden. The real risk to democracy is when the masses see the inequality and become cynical, disinterested or actively revolutionary. I actually think this process has been underway for quite a few years now. Economic problems have almost always led to populism and a rise in the fortunes of far left or far right politicians. The feeling of inequality plays into this too.

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I’m open to the idea that “billionaires have social utility,” but I’m not sure that case has been made here.

Yes, Elon Musk “built mighty industries out of rocketry and electric vehicles,” but was it necessary for one person to have a billion dollars to do that? Couldn’t the same thing have been accomplished by an equally well-capitalized company?

(ninja’d by Fiendish_Astronaut)

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Among everything that has already been said, it simply isn’t sustainable. For there to be an economy, there needs to be transactions, and that requires masses of people doing the transacting. If even we suppose that the rich make more transactions than the poor (probably not true but let’s pretend it is), they certainly don’t make millions and millions of transactions. People are being squeezed out of the economy by having an ever decreasing share of the wealth. People will eat out less, buy less video games, buy less music, watch less movies. These are all things that the rich can only really do a rate limited by their also being human and having limited time.

On top of that, while I don’t advocate violence, you can only stand on a person’s neck for so long before they will do anything, even destroy themselves to get free. Make a person desperate enough and they’ll do stupid things. Like resort to violence.

There are good things about capitalism, there are good things about communism, and everything else in-between. There are bad things about capitalism, and bad things about communism, and everything else in-between. Our capitalism has reached the “bad” phase. We are in or at least becoming a late stage capitalist dystopia.

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I think it’s bad, period, because the few are hoarding the large majority of the wealth. However, it’s been that way throughout history in many places and with many forms of government, so the unfortunate reality seems to be that it is unavoidable.

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The money system produces billionaires. If you think of being a billionaire, and the tasks that one engages in that causes one to become one, as behaviors, and suggest it is a bad behavior… if the current batch of people stopped doing it, someone else would. The money system invariably produces the behavior and rewards it accordingly.

What we call “capitalism” is basically the money system with minimal encumbrances. And most of the alternatives to “capitalism”, e.g., communism and socialism, are still the money system with a few Band-Aid level modifications to redirect the distribution of resources as they otherwise occur under the operations of the money system.

I don’t think billionaires are to blame, nor are the existence of billionaires as a phenomenon, to blame, for the unpleasantnesses, unfairnesses, and inequalities. The system defines them and their lives and activities just as it defines those of the other participants. No, the problem lies with the money system itself. Specific reciprocity and competition as a modality. There’s your culprit.

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Having billionaires is a sign that you have an economy that can produce billionaires, and that’s a good thing.

Having billionaires also means that you have billionaires with undue influence over government and society who can use that influence for their own personal betterment at the cost of the rest of society.

An economy functions not by people having money, but by people spending money. And money that is spent tends to trickle upwards, accumulating in the coffers of the wealthy. The more hands that money passes through to its ultimate destination the more the economy benefits.

As with some of the recent columns, Cecil has thrown out a broad brush, though at least on this only a few thousand individuals that are being pigeonholed together. The fact that billionaires exist is not bad for democracy. However, billionaires can choose to use their wealth in ways that are bad for democracy. They can also choose to use their wealth in ways that are good for democracy. Some do column A, some do column B, and most pick from both as they see fit.

This is US centric of course, where I’d say billionaires are a mixed bag as to whether their actions are beneficial or detrimental to democracy, and I’d suspect that it’s similar in Western Europe. But are the 400 billionaires in China helping out its democracy? How about the 107 in Russia?

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It seems like the presence of billionaires and having a stable democracy are two separate things. Sure, the presences of billionaires could be indicative of a free and capitalistic economy that has a pathway to such riches. And having a free and stable democracy means the government and systems are in place to do the most good for the most people. I think putting restrictions on how much money people can make may have unintended consequences, but putting restrictions on how much influence those billionaires have on democracy would be more prudent and probably easier to accomplish. Lawmakers just need the will and the backbone to enact such restrictions.

As an aside, the income inequality thing seems like more of a risk. If fewer and fewer people are hoarding more and more of the available wealth and locking-up vast quantities of currency, that cannot be good or healthy. As others are mentioning, money needs to be available and flowing to have a healthy economy. There needs to somehow be a balance between the state managing how much money someone can make and all the money getting hoovered-up by a small group of people so no one else has any. But here is my question - is money truly a zero-sum game? I mean, those billionaires got the wealth from somewhere - there was not all that money 100 years ago, so where did it come from?

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The economy is a positive sum game, as long as everyone is playing by the rules. Wealth is created, buildings are built, infrastructure is laid down, workers gain skills and knowledge, all of that is wealth. Money is an indicator as to how much wealth an individual has access to, and ideally, creating wealth means making money, which is great for everyone.

Unfortunately, there are ways of making money that don’t create wealth, or even destroy it, and the more money you have at your disposal, the more ways there are. This shrinks the “pie” while also taking a larger share, leaving less for the rest. Overall, a healthy economy can tolerate a fair amount of this and still continue to grow, but it does hurt the economy, and too much will cause it to stagnate or even shrink.

If billionaires had only as much influence over government as any other voter, and financial shenanigans were better regulated, they would just be part of the economic environment, no more “good or bad” for democracy than the short order cook in your local diner.

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Democracy has a number of challenges. It presupposes that essentially everybody agrees to and follows certain rules and traditions. It is not weakened by the mere existence of billionaires, which might be expected to arise naturally.

Democracy is probably weakened by billionaires successful in rewriting laws so they pay disproportionately little tax. Democracy is also weakened by influencing vast voting blocks in certain ways or by institutions treating people differently. Democracy is weakened by distorting free and fair capitalist markets for the benefit of plutocrats. Adam Smith believed markets work better than government planning when all players enjoyed equal footing and complete transparency of economic information. I think Adam Smith correct, but his important opinions reflect a contemporaneous economy of family-run businesses predating multinational corporations. The “Invisible Hand” was not meant to be consciously manipulating where the Ouija board reader ends up.

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Nothing about the privatization of charity. Nothing about the John Birch Society. Not a single allusion to the influences of robber barons or business magnates in countries that are considered nondemocratic (nor in U.S. history). For example the Saudi Prince that invested half a billion in Russian oil at the start of the Russian invasion of Ukraine. Or any number of Russian oligarchs (read: billionaires behind the Russian military-industrial complex) who have been sanctioned by the U.S. Treasury Department following Russia’s annexation of Crimea. Surely these are important points to consider when asking whether billionaires are bad for democracy, no?

~Max

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Or by buying up media companies and having them put your agenda forth towards the public.

Smith would be aghast at what we call Capitalism, and probably go check his notes with Marx.

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(The following was meant to be added but was cutoff by my slow editing…)

Individual billionaires likely believe many different theories, even regarding how much they actually value democracy. Good theories are clearly expressed and do not overrely on complexity - a smart person should be able to understand the jist, and gobbledygook does not good theory make. I believe there is a role for libertarianism, but am not confident Thiel’s philosophies have been summarized well or fairly here, or if that matters much. He is one billionaire among many, so should not be typecast as reflecting all of them.

Libertarians are not wrong to believe small government may work better than bloated ones, or to think government and regulation can be too intrusive and offer limited innovation. There is a proper balance to optimize popular benefit, and countries which are clearly undemocratic do not reach it. There is certainly a role for private efforts, and some billionaires likely do much good. However, one would hope that those who benefited most from democracy would realize its richness and fragility. It is better to support democracy strongly rather than foment dubious revolutions, which risks eventually undermining even their security or accelerating tragedies of the commons. Has the world or its people really changed so much since 1789 or 1848? Yes, but also less than you might think.

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Part of the problem is it is easy to dilute or confuse the separate but correlated concepts of democracy, capitalism and freedom. Thiel is correct that democracy involves accepting certain rules and conventions. In so accepting these limits, one is perhaps less free but things are also more fair. There are countries which are less fair, where a few people have more freedom to disavow or manipulate rules and convention, but most of the people in these countries have less choice. In this sense, freedom and democracy are not fully compatible. In a healthy democracy, such limits reflect the consensus of a plurality with sensible stopgaps to ensure the primacy of important principles and give voice to a range of opinions.

Terrorism will probably not be diminished by invoking divisive socioeconomic, political or religious dogma, especially without considering local culture and traditions, but rather the broader diffusion of fairness and by making any restrictions on freedom minimal, just and reasonable.

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Except that, with the way US corporate law is structured, creating a business is the opposite of taking a risk. If you start a business and are successful, you get the success. If you start a business and fail, then the business goes bankrupt and is eventually dissolved. Who’s left holding the bag? Not the billionaires.

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The ideal form of democracy is a society where everyone is equally informed and everyone has an equal influence on government. You can argue how practical such a society is, of course, but ultimately any move away from that is technically bad for democracy. Having individual people with an outsized influence on government or an outsized influence on the electorate is bad for democracy. Having people with differing levels of information and interest is bad for democracy. There are steps we can take to minimize these factors, but they can’t be eliminated completely.

Right now, people with access to wealth are having an outsized impact on government. Whether they should have that wealth is another argument entirely, but I don’t think it should be controversial to say that a billionaire shouldn’t have more influence on government than a blue-collar worker living paycheck to paycheck. Both are citizens of the same government and both should be expected to contribute their share to the common welfare of all. Instead, the rich are pushing policies that negatively impact everyone else, to the point that a breakdown of social order doesn’t seem unlikely.

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I agree with your post in general and even with this bit I’ve quoted. However, I still wonder what the alternative could be, particularly in the United States (because I’m living there and more familiar with it than with the systems of other nations/countries). Our system of exchange-via-token rose after abundant supply made division of labor and job specialization possible and our modern societies are really too complex and spread out to make large-scale bartering feasible and international service-exchanges impossible. We’ve gone beyond “I’ll give you my basket of oranges if you come by and fix the hole in my fence.” We’ve gone beyond feudalism and manorialism and taxation by collection of harvests (e.g. ten bushels of wheater per season in taxes go to the king who redistributes it to the soldiers; x% of your yield gets tithed to the Church which, back then, redistributed it to the poor). We’ve even gone beyond the exchange of bank notes that are a proxy for stored wealth (e.g. gold certificates, silver dollars). We are now working with currencies that are valued largely because a substantial enough group of people agree on the valuation – one non-voting share of company A’s stock is worth nn units in a system that we agree values an apple at mm units and a person’s effort in writing opinion columns at kk units and yy units are equivalent to cc units of a currency which only exists as numbers in a shared network of computers.

What Cecil surely knows but forgot to mention in his column is that the wealthy in the USA don’t contribute exclusively to one party or the other. At the level where individuals or companies are making hundreds of thousands, they find it prudent to give at least to the two major parties and to others as well. These are not purely altruistic donations but attempts to gain influence. The fact that they are called political donations makes such efforts something less blatant than is written about in, for instance, Chinese politics but covering it up without the wink-and-a-nod is no better than keeping it out in the open and grinning about it.
The problem is that despite clinging to the words ‘capitalism’ and ‘democracy’ and perpetuating the myth of meritocracy, the United States (and, perhaps by extension, the larger world economy) is a plutocracy: the wealthy occupy positions of power and influence to perpetuate maintenance of the architecture.

And the problem here, as with other institutions which operate according to the rules of capitalism, is that any single or group of lawyers knows darn well that enacting laws that too heavily restrict the power of plutocrats will result in getting voted out at the end of their term (if not earlier). And one cannot be a career politician if one can’t get into an office and the plutocrats will spend enough to prevent an unfavorable politician from regaining a foothold in politics.

The ideal, of course, is that by spending money one exchanges currency for a product or a service that can be used. Capitalism is about consumption of goods and services. One of the reasons many cultures disapprove of gambling is that there is a loss of money but no gain of a service[1] or product – and how could that money have been better spent on, for instance, replacing your kid’s worn-out shoes? But even a billionaire can only consume so much food and use so much electricity in his mansion and, even after spending on goods and services for the companies they run, there’s a lot left over – to do what with? Well, the modern form of gambling is speculation on the success or demise of other people’s companies. And what was originally created as a way to finance the tremendous expenses of railroad companies and their attempts to run lines here, there, and everywhere needed to connect resources to consumers has now become the arena in which middle- and high-income people engage in a practice that really isn’t a whole lot different than betting on horse-races.

This reminds me of some discussions in college back in the 1980’s: There are ways of spending money that don’t help the economy as well. The class in which we discussed this was focussing on nuclear war and we were talking about how the production of missiles required expenditures on materials and labor but was considered a dead-end consumer item – unlike food or a car, a bridge or even lower forms of munitions, nobody wanted a nuclear missile to be consumed because the only way to consume a nuclear missile was to launch it at a target.

I wrote many many essays on this theme back in college. Adam Smith had a great treatise, but he lived in an age of local newspapers and community shopping. He understood there was advertising, but a small community has informal communications that run faster than the Weekly Herald and false advertising (and other dirty sales tactics) would be known throughout a small community fast enough to drive a shady merchant out of business after just a few offenses. Now we have multinational corporations and public relations campaigns and disinformation in abundance beaming fast enough to reach the moon and back in minutes, plus corporate law teams strong enough to sue into bankruptcy any individual who might dare suggest a corporation is doing something wrong.

I think it’s also important to understand that, in a certain sense there’s an inevitable matter of mathematics and scale. Thirty years ago we would have been having this discussion about millionaires and democracy. I remember having this type of discussion in the 1980’s about multi-millionaires and democracy. It’s deceiving to talk about a movie’s net or gross at the box office because that number is going to be higher than the figures for any movie in a decade-or-three-ago and doesn’t really tell us how many tickets were sold. In a similar manner, talking about how many people (or even what percentage of the world population) are billionaires is a bit misleading because the cost of everything goes up year-after-year and ultimately that means the incomes of the 1%-ers is going to appear larger and larger. What’s really relevant (and yes, we’re discussing it here, but I still wanted to keep the general reader from getting too hung up on that threshold number) is the matter of income inequality and its relation to social disparity[2] in our world.

–G!
[1] Though some have rationalized to me that they gained the entertainment of the gambling situation. I guess my thrill-of-the-risk is too heavily outweighed by my depression-over-losing.
[2] Notice I’m not using the term [i]social equality[i/] here. It’s not that I don’t believe in it, it’s just that I’m cynically aware that there are too many who not only believe inequality is inevitable, but that they are somehow winning because they are doing better than others.

Do people really spend millions upon millions
To make us think we care about the planet
At the same time polluting and looting
the only world we’ve got
So they can maximize their profit?

People do!

…–Jackson Browne
…Information Wars
…Looking East

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I’m not going to pretend I know all the answers. I doubt anyone does. But I have the sense that we’ve spent way too many decades, if not centuries at this point, pretending we do, and not doing a damn bit of research.

How about we fund a couple dozen social labs, to play with different models of interaction and decision-making and resource-allocation, shooting for the fairest and most democratic, just to see what possibilities emerge?