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Is billionaire wealth becoming more legitimate? | The Economist
- Shift in Wealth Sources: Research distinguishes between "uncompetitive wealth" (derived from natural resources, casinos, political favors, or inheritance) and "competitive wealth" (derived from creating goods, services, and employing millions), finding the competitive sector is growing while uncompetitive sources are diminishing.
- Sector Analysis: Contrary to the assumption that tech dominates, the share of wealth from the technology sector is slightly lower today than in the early 2000s; significant self-made wealth now also comes from entertainment, sports, finance, and niche industries like retail (e.g., founders of Panda Express and Uniqlo).
- Drivers of Growth: The rise in self-made billionaires is attributed to rapid consumer sector growth in China, strong market returns over the last 25 years, and the "mobile-first" internet era (post-2015) which enabled rapid scaling of ideas (e.g., ByteDance, Spotify, Stripe).
- Decline of Illegitimate Accumulation: The influence of the most egregious forms of billionaire accumulation has waned, with post-Soviet Russian billionaires estimated to be 20% less wealthy than their late-2000s peaks.
- Taxation Data: In the US, the top 400–500 wealthiest individuals face effective tax rates between 45% and 50% of their income, suggesting that gaming the tax system is not the primary driver of the current surge in billionaire numbers.
- Wealth Tax Implications: The source of wealth influences the argument for wealth taxation: while political influence remains a concern regardless of origin, taxing competitive billionaires carries higher economic costs by potentially driving away genuine entrepreneurs (e.g., Lionel Messi or business owners).
- Public Sentiment vs. Reality: While anti-billionaire sentiment is surging due to inequality, the data suggests not all sentiment is warranted, as a growing number of billionaires derive wealth from genuinely useful economic activities rather than systemic exploitation.