13FEBRUARY 20 20 FORBES ASIALet Billionaires Be Billionaires
Billionaires have been
cast as villains, symbols
of all that ails the free
market. Populists on the
left are braying for their
scalps, abetted by pundits
like Thomas Piketty, who
argued in his 2014 book
Capital in the Twenty-
First Century that in-
equality is intrinsic to
capitalism, and only puni-sitting ducks awaiting de-
struction by the next wave
of innovation.
The number of billion-
aires and their wealth
have indeed increased
greatly in recent years.
But this is not because of
some sinister conspiracy
by the rich nor because
of systemic defects in
the capitalist economy.By Yuwa Hedrick-WongECONOMICS MATTERS
Yuwa Hedrick-Wong is Chief Economics
Commentator for Forbes Asia. He is also a
visiting scholar at the Lee Kuan Yew School
of Public Policy, National University of
Singapore. Having worked as an economist
across the Asia-Pacific, Europe, Middle East
and Africa in the past 25 years, he regularly
writes columns about the global economy
for Forbes Asia. Views expressed are his own.
Email: [email protected].tive taxes on the rich can tame it.
At the other end of the spectrum,
historian Niall Ferguson offers differ-
ent advice. In a recent interview with McKinsey Quarterly,
he urged business titans and billionaires to stop being “the
villain.” He gives us the history lesson contrasting John
D. Rockefeller with Andrew Carnegie. Carnegie, Ferguson
writes, understood the power of philanthropy and Rock-
efeller didn’t, which is why people today tend to associ-
ate Carnegie fondly with public libraries instead of steel,
while Rockefeller is remembered for Standard Oil and
greed. In other words, Ferguson advises big businesses
and wealthy individuals to splurge on charity to enhance
their reputation.
Ferguson is wrong. Populist rage isn’t about economic
inequality, but rather people’s belief that their dignity and
worth are being trampled on by uncaring, globalized elites,
as Francis Fukuyama compellingly argued in his 2018 book
Identity: The Demand for Dignity and the Politics of Re-
sentment. Throwing money at them would be like pouring
gasoline on a fire.
The left’s errors are more egregious. Its standard bearers
are blind to the fact that accumulation of massive personal
wealth in a market economy is only the tip of the Schumpe-
terian iceberg of creative destruction, which generates mas-
sive prosperity for society while injecting dynamism into
the economy. Creative destruction is no ordinary business
competition. It works through innovation: an entrepreneur’s
startup offering a new product that stands to make the in-
cumbent obsolete. At this juncture of the creative destruction
cycle, successful newcomers can amass extraordinary wealth,
turning many into billionaires. But the cycle of creative de-
struction doesn’t stop there. Billionaires can stay ahead of
new challengers only if they continue to be innovative. As
soon as they lapse into complacent rent-seeking, they becomeTwo factors, one old and one new, are
chiefly responsible. The old is as old
as humanity. In an impressive survey
of evidence from the Stone Age to today, historian Walter
Scheidel concludes in his 2017 book The Great Leveler: Vio-
lence and the History of Inequality from the Stone Age to the
Twenty-First Century that economic inequality increases
during all periods of peace and stability.
Only mass violence and widespread catastrophes can
“level” inequality, but then only temporarily. With return to
peace and stability comes a new rise in economic inequal-
ity regardless of what the economic system is. The world
has been spared from Scheidel’s “levelers” since the end of
World War II, which not surprisingly has led to a rise in
economic inequality.
This old factor is reinforced by a new factor in recent de-
cades, which is the stupendous growth in market connec-
tivity across the world that enables businesses to scale up
in ways unimaginable before. As a consequence, a brilliant
business idea today can reach markets many times the size
of an equally brilliant idea just a few decades back, which
supercharges wealth creation for successful entrepreneurs,
turning more of them into billionaires.
We live in a world in which inequality, billionaires and
prosperity are inextricably linked. We must let billionaires
be billionaires.FIL
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