Épater Les Billionaires
by Michael Brenner on 22 Jan 2024 0 Comment

America’s newly-minted flock of billionaires are a plague upon the land. Their grasping hands blight all that they touch. Insatiable egos drive them to possess or control everything: the financialized economy, the plethora of regulatory agencies, the Congress, and the White House; public education, universities, health care; land management; the judicial system; all foreign dealings that bear on commerce and monetary matters; the ideological underpinnings of public life. Plus, counterparts of the above at the state level. They act with a sense of entitlement, impunity and immunity.


The salvation of our institutions, our collective identity, our national integrity requires that they be curbed, diminished, and held accountable.  Otherwise, our virtual near plutocracy soon will become an institutionalized plutocracy – perhaps with an autocratic overlay. Here are a set of proposals for meeting that daunting challenge. They are presented in bullet fashion.


1] Recognize that most of these nouveau riches have made their fortunes via hedge funds, private equity, and financial manoeuvring by banks. Acknowledge that those activities are parasitic – adding nothing to the economic well-being of the country, but rather channelling vast amounts of wealth upwards, eroding our industrial base, and corrupting our free-market, capitalistic system.


2] Despite their outsized, and largely negative role in the economy, their activities and influence receive very little critical attention. No Presidential candidate that I know of has made them an issue. The exceptional public figure who did – briefly – was Newt Gingrich in his primary campaigns of 2012. That was the reason for his surprise big win in the South Carolina vote. It set up a showdown in Florida against Mitt Romney, his main rival who repeatedly boasted of his success as founder of Bain Capital Investments hedge fund. As the date for the culminating debate loomed, the political world held its breath: would Gingrich tell Romney to his face that “your celebrating of the Bain success impressed him about as much as a claim that you paid your way through college by dealing 3-card monte outside of Bloomingdale’s on Lexington Avenue in Manhattan every summer”? No such thing; Gingrich suddenly lost his voice, making no reference whatsoever to his seeming trump card. Why? He had been handed the black spot signalling that that such perverse behaviour would ensure that he’d be eating lunch alone in D.C. forever after – and, would have to finance his various ventures by robbing his piggy bank.


3] Highlight the dependence of universities, foundations, cultural institutions, think tanks and many NGOs on funding from those malefactors of wealth who contribute a portion of their loot in exchange for tax breaks and status. Striking example: the most prestigious private universities have built swollen endowments topped by Harvard’s nearly $40 billion. They routinely rack up returns on investments far exceeding that achieved by ordinary investors. How do they do it? Simple – overwhelmingly through hedge funds and private equity. Together, they represent 70% of Harvard’s portfolio.


4] Cut the billionaires down to size. That means readjusting the tax table so that the very top bracket of earners would pay at a confiscatory rate – as they did in the Eisenhower era of the 1950s, seal shut the innumerable loopholes that allow them to shield the bulk of their income, introduce tighter regulation of lucrative financial manoeuvres, and eliminate unjustified subsidies.


As to the last, there is no good reason to put tens of billions into the pockets of high-tech electronics companies as part of a geopolitical play to contain/beat China. Those companies are flush with cash, and have access to the huge amounts of uninvested capital sitting in the accounts of financial firms. Moreover, the sanctions regime imposed on China raises costs and reduces access to Chinese products at the expense of consumers while bolstering revenues for the beneficiaries. Moreover, the strategic design of pursuing an all-out Cold War on China is a highly dubious proposition in itself.


5] Restrict entry of hedge funds/private equity into the health and residential real estate sectors. They have been particularly active in the former where their manoeuvres are a major contributor to the manifest defects of a for-profit medical system that delivers less care for more money than any other in the world.  In the latter, they exploited the Great Financial Crisis by buying up millions of foreclosed houses at bargain rates thanks to Obama’s adamant refusal to aid underwater mortgage holders. Those wheeler-dealers subsequently turned many of them into rental units, thereby accentuating the steep rise in the price of homes and apartments alike.


6] Rigorously apply antitrust laws, bolstered by necessary supplementary statutes, to break up media conglomerates.


7] Eliminate the social media oligarchs’ control over access and content – deciding who is banned and what can be posted. A grievous error was made at the outset in defining those domains as private property rather than as a public utility to be regulated in the public interest. (Alexander Graham Bell didn’t presume to dictatorial power over who could use a telephone and what one could say on it – or sell your personal data to businesses that would badger you for the rest of your days). Moreover, companies like Facebook/META and Twitter/X collude with government agencies routinely to identify and censor material the latter deem not to be in the national interest. Both forms of abuse are tolerated by political factions who vie to get social media to follow their preferences as to who is kosher and who is not. This double censorship regime could be ended were those companies officially regulated. Then, the arbitrary actions of the billionaire oligarchs would cease and government actions exposed to legal challenge.


8] Universities and cultural institutions should apply strict guidelines on large financial donations. The principle should be: thank you for your gift; this does not give you any privilege to interfere with our programs and policies. A plaque, or perhaps the honour of a building being christened in your name, however, nothing beyond that. If those terms do not satisfy you, then our response to your offer is “Thanks, but no thanks.”


Mr. Ackman who has succeeded in imposing his sectarian politico/religious views on Harvard University leveraged a gift of roughly $40 million into the power to dictate who runs the university and how it handles controversial issues. Yet, with its $40 billion endowment, the Board of Trustees would have paid little financial price if Ackman had taken his misbegotten hedge fund loot elsewhere – perhaps to Sotheby’s where he could squander it on a piece of forged /misattributed artwork. $40 billion = 1/10 of 1% of that sum. Or, 1% of the likely return that Harvard will earn on its investments this year. The integrity and self-respect of a hallowed institution of learning should be worth that modest sacrifice.


There is no indication that the Board members ever considered what would be an appropriate decision set in those terms. Anyone with a personal familiarity with the calibre of contemporary leadership in American universities is not at all surprised. After all, Harvard is the university that gave Jeffrey Epstein the run of the place with an escort from three successive Presidents. (Anyway, it is unimaginable that a Board of 32 Overseers meeting by Zoom under time pressure could hold an informed, considered examination of this thorny issue – 32 is not a decision-making body, it’s a luncheon club). The same story unfolded at the University of Pennsylvania where another black knight coerced the Trustees into bowing to his ultimatum by sacking its President.


We should bear in mind that these supposedly philanthropic gifts are not pure acts of altruism. The donator receives a boost in status and prominence that he craves. In the Renaissance, rich merchants would underwrite the cost of a master painting whose religious theme would grace the cathedral, church or cloister where it hung. In return, his portrait would appear in miniature – maybe as one of the Wise Men from the East bedazzled by the baby Jesus. A hoped-for side benefit was an EZ pass through the pearly gates. Types like Ackman and Epstein substitute the deferential respect from distinguished institutions of learning for eternal residence on Cloud 9.


Ackman already has exploited the publicity he has received to vaunt himself into the ranks of national ‘celebrity.’ Even revelation that his Ph.D. wife had been guilty of plagiarism was grist for his mill – as he used the occasion to fire off a barrage of dyspeptic emails. His ‘trump card’ was the accusation that the couple were victims of anti-Semitism – a man of his times.  Clearly, Ackman’s future is to preen in the limelight where he’ll be pronouncing on all manner of things – a la Elon Musk. The media will eat it up – Taylor Swift was last month.


Another object example is provided by Lloyd Blankfein of Goldman Sachs notoriety who laundered his reputation by making a much celebrated $26 million donation to Harvard – with the added sweetener of inviting President Drew Gilpin Faust to join the GS Board upon her retirement. In today’s America, all that is needed for cleansing a reputation is a quick rinse.


For all these quid pro quo donors, the real cost amounts to little more than a rounding error in their account book – recoverable by foregoing his routine practice of trading in their Bentleys when the ashtray is full.


Most public universities are now equally aggressive in soliciting private donations. It reflects a combination of need and ambition. The abandonment of higher education by state governments in the name of austerity has left them desperately scrounging for scraps wherever they can find them. This represents a sharp deviation from historical practice in institutions like the University of California. For decades, it observed a strict prohibition on accepting private donations as a matter of principle. Naming buildings after individuals was limited to Nobel Prize winners - Calvin, Chamberlain, Lawrence in Berkeley and Ralph Bunche at UCLA. The one, partial exception was the pool and recreation complex in Strawberry Canyon at Berkeley (with a panoramic view of San Francisco Bay) funded by the Strauss family of Levi /Strauss fame. Their self-esteem didn’t require that their name be splashed on the façade in letters visible from the Golden Gate bridge.


9] We should recall that the norm for charitable donations by the super-wealthy was very different in earlier epochs. The model was to give the money to good causes without strings. Consider Andrew Carnegie, the great steel baron. Most of his vast fortune was dedicated to developing public libraries across America. Too, he endowed the Carnegie Endowment for Peace. Having written the checks, he retired to his castle in the Scottish Highlands where he showed no interest in monitoring whether the director of the Carnegie complex in Pittsburgh once had written something unflattering about Robert Burns or his advocacy for women’s suffrage.


10] Crackdown on the ingenious schemes used to circumvent the inheritance tax. Today, they are exploited with impunity as the IRS habitually turns a blind eye.


The most serious, systemically consequential, abuse of billionaire riches involves the free use of their fortunes to influence and direct public policy. The method is insidious. Bill Gates, now emulated by Mark Zuckerberg, announced that they will donate a large part of their personal wealth to establish a “public interest” foundation. Endowed with a broad mandate to promote whatever causes it deems worthwhile, the arrangement in effect serves as an instrument for political action as directed by a board whose head is the so-called benefactor. The monies contributed are characterized as tax-deductible charitable donations. In short, personal financial assets are transmuted into political assets – bypassing public authorities in the process. With sums in the tens of billions at the foundation’s disposal, they are able, and inclined, to act as a private, independent and uniquely powerful force. One example: Gates has arrogated to himself the position of chief promoter of charter schools. Beyond lobbying, public advocacy, and support of sympathetic allies in the media and academia, he initiates and underwrites legal appeals.


Simply put, does tens of billions get allocated by the peoples’ elected officials or by the whim and preference of Bill or Zuck?


The billionaire barons are, for the most part, arrogant egoists who feel that the world should bow before them. That conceit should be punctured at every opportunity. Otherwise, we encourage their grandiose ambitions, enhance their power, and endorse a dubious model of success and citizenship for contemporary America. 

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