Russia? China? No. The rising world superpower is the billionaire class. Our problem, says Sean McFate, is that we’re still thinking in nation states.
Nation states have only existed for the last 300-400 years. Before that, wealthy groups – tribes, empires, aristocracies, etc – employed mercenaries to wage private wars.
As wealth inequality reaches combustion point, we could land back in the status quo ante of the Middle Ages. Who will our overlords be? Any or all of the 26 ultra-rich billionaires who own as much as the world’s 3.8 billion poorest. What about Fortune 500, which is more powerful than most of the states in the world? Random billionaires, multinational corporations, and the extractive industry may buy armies and wage war on their own terms.
Dr. Sean McFate is an adviser to Oxford University’s Centre for Technology and Global Affairs, as well as a professor of strategy at the National Defense University and Georgetown University’s School of Foreign Service in Washington, DC. Additionally, he is the author of several books, including Shadow War, The New Rules of War, and The Modern Mercenary.
SEAN MCFATE: The United States, especially, has been now accustomed, for 25 years, as being the universal and unitary superpower. That’s not going to last forever. I think most people know this, even though some may be in cognitive dissonance over this. The truth is there are rising powers like Russia and China, but there are other rising powers too. One of our problems is that we live in a state-centric view of the universe. International relations, for most of us, is run by states. Nation states are the global, political unit of the international order. And this is what we learn in social studies as kids. But that is actually not the way the world has worked for most of human history. States are actually about 300 or 400 years old. Before there were states, there were empires, and there were tribes, and everything else. The reign of states and only states can wage war legitimately that is coming to a close. We’re actually going back to the status quo ante of when global order was a free-for-all of like the Middle Ages of antiquity, to what came before. And one of the things of that free-for-all is that: Who else were superpowers? It wasn’t just states. So in the Middle Ages, the papacy was a superpower. Rich aristocracies were superpowers. Are we going back this world again?
So you know we have random billionaires today who have as much power as states. There are 62 people in the planet who own the equivalent of half the world’s wealth. 62 people. You can put them all onto a bus. You have multinational corporations. We have the Fortune 500, which are more powerful than most of the states in the world. Of the 190, 194 states in the world, most are fragile or failed. We only think the top 25 states, like the US, Western Europe, Eastern Asia, et cetera. But that’s an anomaly. The vast majority of states in the world are more either regimes hiding inside states or just outright dumpster fires. So what we’re going to see in the future is those who have wealth and political power, who can also hire their own private armies now, become super powers. The world used to wage a lot of private war in military history. In fact, most of military history is privatized. Mercenaries have always been a major component of war. And what happens when you privatize war is that now military strategies blend with business ones. And this puts us at risk because our four stars who are in charge of our military and our policymakers are not prepared for that type of warfare.
So mercenaries were around for millennia. Mercenaries have been around since forever. And it’s anomalous in history that 150 years ago they sort of went away. And why that is is still a mystery. People say, well, after the 30 Years War, or after the Peace of Westphalia of 1648, where mercenaries ran amok, both rulers and ruled were tired of them, and rulers and kings started to invest in their own standing armies, which is very expensive. I mean, mercenaries are cheaper than standing armies, just like it’s cheaper to rent than to own…
The new Rising staff is outraged that there are leaks of Billioinaire tax returns.
Warren Buffett appears to be the safest kind of billionaire: the good kind. Mr. Buffett is neither Zuckerbergian messiah nor Musky provocateur, neither Bezosist space cadet nor Sacklerian undertaker. He is, or seems to be, quiet, humble, indifferent to money, philanthropic and critical of the system that allowed him to rise. Years ago, a proposed tax increase was named after him.
It’s easy for people to think: If only members of the Sackler family were more like Mr. Buffett, imagine how many lives would have been saved. If only the billionaires who haven’t signed the Giving Pledge would give away as much as Mr. Buffett has pledged to, imagine the impact on the world. If only more billionaires would make use of the system without feeling the need to pervert it, so many of our troubles would vanish.
So I regret to inform you that Mr. Buffett is actually the most dangerous kind of billionaire we have. The worst billionaires are the Good Billionaires. The sort who make it seem like the problem is the distortion of the system when, in fact, the problem is the system.
Actually malevolent and disastrously negligent plutocrats get most of the attention. And when we hear about these Bad Billionaire exploits, it is possible to conclude from them that the system needs better policing, updated regulations and maybe slightly higher taxes. The system needs to be made to work again.
But as America slouches toward plutocracy, our problem isn’t the virtue level of billionaires. It’s a set of social arrangements that make it possible for anyone to gain and guard and keep so much wealth, even as millions of others lack for food, work, housing, health, connectivity, education, dignity and the occasion to pursue their happiness.
There is no way to be a billionaire in America without taking advantage of a system predicated on cruelty, a system whose tax code and labor laws and regulatory apparatus prioritize your needs above most people’s. Even noted Good Billionaire Mr. Buffett has profited from Coca-Cola’s sugary drinks, Amazon’s union busting, Chevron’s oil drilling, Clayton Homes’s predatory loans and, as the country learned recently, the failure to tax billionaires on their wealth.
The Good Billionaire myth took a hard blow in recent days when Mr. Buffett won a dubious distinction. A staggering exposé published by ProPublica revealed just how little the biggest plutocrats pay in taxes, despite mounting piles of wealth. And at the very top of that list of plutocrats — many of them with troubled reputations — was the cleanest, grandfatherliest plutocrat of them all: Mr. Buffett.
ProPublica’s story was unusual in that, for once, it was the Good Billionaire at the top of the naughty list. This was helpful, because it served to indict the system that makes him possible, even when it is working perfectly, wholly lawfully.
From 2014 to 2018, Mr. Buffett’s wealth soared by $24.3 billion, according to ProPublica. (To underline, this is just the amount the fortune grew.) The amount of taxes Mr. Buffett paid over this period? $23.7 million. If middle-class Americans in their 40s enjoyed such a low effective tax rate, they would have paid a few dozen bucks per household over this same time period. Instead, as the ProPublica story notes, they paid around $62,000.
Imagine if Mr. Buffett had to pay the same fraction of the growth of his net worth that regular people do. Taxing that money could have helped pay for bridge repairs, mammograms, and free day care. More important — and this isn’t said enough — there is intrinsic value in shrinking gargantuan fortunes. The sway plutocrats have over public life is inconsistent with a one person, one vote democracy.
The important point here is that Mr. Buffett’s tax payments as detailed by ProPublica are fully legal. Though Mr. Buffett has called for changing the tax system, while we have the one we have, he will continue to benefit from the madness of taxing billionaires for their income, rather than their wealth, when their income is pretty much just a number they can construct.
I asked Mr. Buffett last week, via his longtime secretary, Debbie Bosanek, if he could think of even one tax or accounting practice that he has come to regret. Sure, he may have followed the letter of the law. But was there any aspect of his patriotism or humanity that left him feeling guilty for hoarding so much untaxed when regular people pay so much in taxes? Though Ms. Bosanek responded to an initial inquiry, she declined to offer any such examples.
In a long statement last week, Mr. Buffett defended himself by pointing to his long advocacy for a fairer taxation system, and then he immediately told on himself by undermining the very idea of taxes in the same letter. “I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing U.S. debt.”
In other words: I believe in higher income taxes on people like me, but I’m highly organized to avoid having income to report, and I don’t really believe in taxes because I think I should decide how these surplus resources are spent.
And this points to another way in which the Good Billionaire is hard to deal with. The crooks and the scoundrels and the people manifestly looking for quick P.R. highs come to philanthropy for the marketing payoff. When Goldman Sachs announces a new initiative on fighting the racial wealth gap despite having done little to repair the damage it did to Black homeowners in contributing to the 2008 financial meltdown, some may be fooled, but, more and more, many are not.
Supposed Good Billionaires like Mr. Buffett and his friend Bill Gates are more complicated because they give real money. They may benefit from marketing but also seem to many people to be motivated by more than that, and they apply their smarts to the work.
Yet because of this, it is often the Good Billionaires who end up with the most illegitimate influence over public life. No one is asking members of the Sackler family for public health advice. But Mr. Gates has become a major policy voice on vaccines despite holding no elected position. Mr. Buffett, for his part, has shied away from that kind of lane hopping and richsplaining, but in donating his fortune to Mr. Gates’s foundation he has pumped up that undemocratic influence.
Mr. Buffett is almost the perfectly made billionaire for this moment in which, at last, many Americans are beginning to question not only corruptions of the system but the matter of whether billionaires should exist at all. He doesn’t do the things the worst of them do. He isn’t in it for what they’re in it for. He clearly must care about money, but he also kind of doesn’t care about money. Even in his generosity, he has avoided the imperial lording over that others cannot resist.
And this is what makes him so troubling, because through him we are tempted into believing that a system can be defended that allows a man to accumulate more than $100 billion while people are sleeping, in hock to him, in his mobile homes, shortening their lives with the beverages he’s invested in, scampering around the warehouses whose nonunion status has redounded to his money pile.
It can’t. And who keeps us from seeing that simple, stark truth more effectively, more perniciously, than the Good Billionaire?
Bill and Melinda Gates are giving their three kids “a minuscule portion” of their estimated $89 billion, they told the Daily Mail in 2011. “It will mean they have to find their own way,” Bill said at the time.
Although even a fraction of the Gates’ wealth will be enough to put their kids among the wealthiest individuals in the world, Bill believes it will compel them to rely on themselves. “It’s not a favor to kids to have them have huge sums of wealth,” he told “This Morning” last year, as reported by SFGate. “It distorts anything they might do, creating their own path.”
The couple plans to put the majority of their fortune toward charitable causes, namely the Bill & Melinda Gates Foundation, which aims to eradicate disease, poverty and hunger across the globe. Along with fellow billionaire Warren Buffett, the Gateses also helped create the Giving Pledge in 2010, which encourages more of the super-rich to leave the majority of their wealth to philanthropic causes.
The secret lives of the super rich
Billionaire’s Row Documentary
Jeff Bezos and Bill Gates, Two gentlemen fighting back and forth for the title of world richest man These two individuals seem very very similar, for starters of course they are both billionaires, an elite worldwide club with around 2 and a half thousand members, they are both white, male tech entrepreneurs, from the united states, and even more specifically from Seattle, and even more specifically their primary residence is in Medina a same small town just outside of Seattle. So it looks like these two are pretty similar, but in reality their fortunes couldn’t be more different.
60:42thank you what is the most persistent60:45zombie idea on the left and is there one60:47is there an idea to what you have60:50subscribed in the past which you now60:51kind of put into that category oh boy I60:55mean the trend the left is not nearly as60:58good at maintaining zombie ideas partly61:03because there there are in fact not that61:07many leftist billionaires and and61:09billionaires there are some but not very61:12leftist and so I mean well let me put61:20this way we were talking about climate61:22and environment and and climate change61:25and economic growth I’m running to a lot61:27of people still who are now this is61:30telling you that there I don’t think61:31there are a large part of the electorate61:33but there are61:34but the circles I move in I run into61:36people who are sure that to fight61:39climate change we have to stop living61:41the way we’re living and a much more61:43austere back-to-nature lifestyle is the61:47only way to deal with climate and that’s61:49an idea that it’s just clearly wrong if61:53we actually asked by we know enough61:55about the technological and economic61:57solution to climate change that ASUS a62:00green society that does not burden the62:02planet would almost certainly be a62:04society that looks a whole lot like what62:06we have now in people with the driving62:08cars they’d be using electricity but the62:10cars with the electric and the62:12electricity would be generated by solar62:13and wind and it but the actual rhythm of62:16daily life could look very much like62:18what we we have we don’t have to go back62:20to to an agrarian pastoral Eden to to to62:25deal with the issue but it’s it’s62:26something that sounds again it sounds62:29serious from a different point of view62:30it sounds like if you’re serious about62:31climate change you must be serious and62:34believing that we have to give up on62:35this consumer oriented society and and62:38all of these these comforts that we take62:40for granted but in fact it’s not true so62:43that would here that would be an example62:44of a kind of a left-wing zombie in other62:46countries in the belief that you can62:49just dictate all prices and you know you62:53can put price controls on everything and62:54not and never face shortages that’s not62:58something we see in the US but they62:59Venezuela clearly there’s some refusal63:02to face reality going on but that would63:05be these house but again zombies mostly63:08flourished because their big money63:10behind them not all of them but mostly63:12and and and the no.4 for every George63:17Soros there are 50 quiet billionaires63:21supporting extremely reactionary causes63:23and what about the question the question63:25of an idea you’ve changed your mind oh63:27so most of my changes have been in the63:33in the other direction look at minimum63:36wages no no a piece of economic research63:41has has shaken my views as much63:46actually I’m gonna give you two and and63:50me at this this is a great risk of63:52turning into a Monty Python routine63:54amongst the issues three okay so64:00actually so I’ll give you two one64:01minimum wages up until sometime in the64:05mid 1990s I believe that clearly64:09increases in minimum wages would cost64:11jobs they might be desirable otherwise64:13but econ 101 said that that’s what64:15happened and then we got this amazing64:17body of empirical research because we64:19get in the United States we get a lot of64:21natural experiments when one state64:22raises its minimum wage and the64:24neighboring state does not and the64:26overwhelming evidence says that minimum64:28wage increases at least within the range64:30we see in the US do not cost jobs and64:33that changed my view has said labor64:34markets are very different from where I64:35thought it actually moved me towards64:38emphasizing the role of power and in64:40labor relations and so on another one I64:43used to think that it was always64:44possible just by printing money to get64:47full employment and and the experience64:50of Japan in the late 1990s when despite64:54a very easy monetary policy they slid64:56into deflation changed my views totally65:00I there was a there was a group of us65:03actually of when I when I arrived at65:05Princeton in 2000 was a bunch of Japan65:07warriors who were really very shaken by65:10the Japanese experience because we we65:12looked at it said you know this could65:13happen to us so with me people you65:16wouldn’t have heard of but very65:17influential in the professional arts65:18Vince and Mike Woodford and the fourth65:21was Bernanke Ben Bernanke don’t know65:24what happened to him he disappeared I65:26think yeah so we so that but no the the65:31Japanese Japan’s Lost Decade65:33changed my view and basically made me65:36much more Keynesian much more believer65:38that there are times when you really65:40need to have the government do the65:41spending yes how do you successfully65:45regulate the financial markets while not65:50scaring the business community in sort65:53of trying to65:55in the middle of a class that any form65:58of common sense reform or tax is not66:01Marxist Leninist and it’s not going to66:03take away all their assets and money66:05okay you know we’ve done this before66:10right we imposed extensive bank66:14regulation in the 30s which didn’t66:17obviously cripple the economy we the66:19post-war generation was was the best66:22generation in in in certainly in US66:24economic history the the the only I66:29would say the problem is not scaring66:31people not looking Marxist the problem66:33with regulating financial markets is66:35first of all they’re the financiers have66:39a lot of clout but but beyond that it is66:45hard to keep up with financial66:49innovation which very often is not66:53innovating in the sense of you know66:55doing things better but as is innovating66:58a way of finding ways to set things up67:01that evade the regulations so you67:04regulate banks and then people create67:06something that is functionally a bank67:07but doesn’t technically meet the67:09definition of a bank and evades the67:11regulations it’s hard to keep up with67:13that and and if it’s not a well solved67:16problem in the we had a significant67:21financial reform in the US under Obama67:24not everything you I would have wanted67:26but it was significant but on many of67:29the issues it depends upon this67:31Financial Stability Council which has to67:34define systemic lis important67:37institutions that they’re mean and67:40there’s no clear definition it’s kind of67:43like pornography you know when you see67:44it which is not a stupid way to do it67:47but it depends upon having honest people67:51of goodwill in charge and now we have67:55the Trump administration so so the67:58dodd-frank is not a very effective tool68:00and it always depended upon upon good68:04leadership and68:06we have not found I haven’t come up with68:08a way to the thing about doing a regular68:10old-fashioned commercial banks is that68:15that system works the regulations work68:18the the guarantees work without68:21requiring that there be smart leadership68:23or good judgment calls at the top and68:25unfortunately everything we try to do to68:27deal with more modern financial68:29institutions is requires both goodwill68:34and sophistication which are both the68:36now and very short supply question from68:39the balcony please thanks very much so68:41we’ve mostly discussed zombi ideas in68:43the kind of domestic policy context i68:45wanted to ask about zombie ideas in the68:47international context in the sense of68:50the Washington Consensus and trade68:51liberalization and specifically I want68:54to ask what your thoughts are on the68:56extent to which countries can still68:58develop by exporting I has the impact of69:02technology and the scale of China made69:06it essentially impossible for a trade69:07liberalization to facilitate development69:10okay that’s a good question69:13I think empirically it’s just the69:16premise is wrong so we all know about69:19China and we know that China occupies69:21this huge space and China is a unique69:25success story nobody else has matched69:27their rates of growth but it’s not the69:31only success story so when I took I like69:34to talk about the the unfamiliar cases69:39Bangladesh Bangladesh is a desperately69:43poor country and and compared with69:46working conditions and in in the first69:49world it’s it’s is horrible and they69:51have factories that collapse and kill69:53hundreds of workers and all of that but69:56Bangladesh is actually they’ve they’ve69:59tripled their per capita income and70:03there there are very poor country but70:06they were a country that was right on70:07the edge of Malthusian starvation and70:11it’s all because of the ability to70:13export if the the ability basically70:17clothing labor-intensive70:19that they’ve been steadily gaining70:21market share at China’s expense because70:23China has been moving upscale and that’s70:26that’s showing that you can get yeah70:28that’s that’s major development that’s a70:29major change it’s it’s not it’s a long70:32way from from turning into into Western70:35Europe but it’s it’s it’s a very big70:37deal and it’s showing that the70:39globalization can still work for for70:41poor countries so I that’s that’s what70:45the line Bangladesh is not a it’s not a70:48banana republic it’s a pajama republic70:51but but that you know they can make fun70:54of it but in fact their use that’s a70:56very large number of people who are70:57lifted at least some ways above71:00starvation level by globalization and71:03another question from the balcony please71:06looking at it as a economist with a71:08mathematical mind what impact do you71:11think a shift a proportional71:12representation would have over time as71:15you compared to the electoral colleges71:18and first-past-the-post which we have in71:19the UK other British Commonwealth71:22countries which tend to over time have71:24led to two party states so what if we71:26shifted the proportional representation71:28okay I mean firstly the u.s. the the71:33u.s. electoral college system is71:35monstrosity that’s a that’s not about71:38first-past-the-post it’s about a system71:40that at the presidential level gives71:42disproportionate representation to to71:45some states with small populations and71:48at even more important we have the71:50Senate which where half the Senators are71:53elected by 16 percent of the population71:55so this is a that that’s crazy71:58that’s a deeply basically we’ve we’ve72:00evolved into a rotten borough system for72:03half of the US government and that’s72:05that’s a clear monstrosity as for the72:08rest I mean I don’t know I mean this is72:13not I’m not a political scientist I talk72:16to political scientists which by the way72:18is rare for economists we actually talk72:20I actually talk to these goods to other72:21social sciences and take them seriously72:24and but what I would say is that the the72:29there are places with proportional72:31representation72:32that also managed to be very72:34dysfunctional so you know Israel I72:38believe has proportional representation72:39and I would not say that Israeli72:44politics these past 15 years have been a72:47model of good ideas and wisdom72:50prevailing in fact they I mean every72:52system has its problems and one of the72:54problems with proportional72:55representation is it sometimes causes72:57small factional parties with with very73:01antisocial goals to to be kingmakers so73:06that’s not an easy solution either I73:08don’t really know what the answer is73:10except to say that that you know people73:13people are both generally clever and73:19often nasty and they can find a way to73:21screw up any system question trip down73:24here hi73:25you said earlier that the American73:26economy is in a pretty strong position73:28so I was wondering how much he thought73:30Trump could legitimately claim73:32responsibility for that and then73:33alongside that what are the strong II73:35cannot strongest economic arguments to73:37voters for voting against him okay the73:41reason that we’re in a relatively strong73:43economic position is that it’s basically73:47deficit spending after years and years73:49of saying no debt this is an existential73:52threat then we must have austerity which73:54really hobbled the US recovery under73:58Obama as soon as Trump was in office for74:00Republicans said oh we don’t care about74:02that I mean the last two State of the74:04Union speeches have not so much as74:06mentioned the deficit and that even74:09though it’s badly done it does give a74:13boost to demand so I guess you could say74:16the Trump has gets some credit in the74:19sense that by getting elected he caused74:22congressional Republicans to stop74:24sabotaging the economy that’s not a you74:27know vote Republican and and and and the74:29and the economy won’t be undermined by74:31by our sabotage efforts so that’s not a74:34great electoral slogan but it might win74:36in the election I have to say and I lost74:40the room what the rest of that was but74:42the74:44was one of the strong strongest economic74:46arguments to voters to vote against him74:48oh the thing about Trump is that he’s74:50managed to preside over a economy that74:55by sort of aggregate measures74:58unemployment rate is low GDP growth has75:02been pretty good not spectacular but75:04pretty good but which is is showing75:08increased hardship for many people75:11despite that I mean we were making huge75:13progress in reducing the number of75:15people without health insurance that has75:17now gone into reverse the number of75:19people who say that their that they are75:23that they are postponing or not75:27undertaking necessary medical treatment75:29because of expense has skyrocketed75:32and the America like the UK there’s75:38tremendous regional divergence we have a75:43large part of the large parts of the the75:47heartland which are in severe economic75:50decline as social collapse and that has75:53just accelerated you know despite the75:55low overall unemployment rate the state75:58of affairs in Eastern Kentucky is76:01terrible and life expectancy I guess it76:06rose slightly this past year but you76:07know mortality rates are rising and it’s76:11as in case an Angus Deaton say deaths of76:14despair people dying from from opioids76:19alcohol and suicide have been rising76:22despite the strong economy so this is76:25actually that earlier question about GDP76:27you know the GDP growth not saying that76:31the that it’s false but under under the76:34surface of that good GDP growth is76:36actually a substantial increase in76:38misery just a one final question from76:43thanks bull great to see you here my76:48question is about the u.s. minimum wage76:50obviously it’s very very low compared76:53it should be you know from visiting the76:55US for last 25 years it seems P and76:57getting no three jobs to make ends meet77:00what do you think the minimum wage77:02should be and one of the reasons other77:05than you know losing jobs that perhaps77:07people have been keeping it down the77:09minimum wage suppressed oh so I asked77:12that in Reverse I mean the reason the77:14minimum wage has been held down is77:15because employers want chief labor and77:20they have a lot of clout the question of77:24how high to go is an interesting one77:26and it’s the so even the the big move in77:34the u.s. is for $15 and that’s a I’d say77:39even $15 an hour even Alan Krueger who77:43was one of the key researchers on that77:45revelatory work was a little nervous77:48about 15 and that the problem is77:52regional the the state of New York the77:55state of California no problem you have77:58a $15 minimum wage and and there’s78:00absolutely no reason to think that78:02that’s economic difficulty we’re talking78:05about Mississippi or Alabama places with78:08much lower productivity you might start78:10to have some job loss at that level I78:12think that the preponderance of the78:14evidence says that $15 is okay that78:18there might be some minor job loss in78:21some of the least productive parts of78:22the US but but overall not a big deal I78:26think 20 I would start to make me really78:28nervous78:29that then you start to really be a78:30problem in in potentially problematic78:33territory but it’s it’s why they see78:36actually in this case I think a federal78:38minimum wage of 15 and then higher wages78:40and in in in appropriate States it makes78:44sense this is one of these cases where78:45federalism works to our advantage and78:47and it’s interesting by the way Alan78:49Krueger did do at one point he he went78:52to to Puerto Rico which part of the u.s.78:55is subject to the u.s. minimum wage and78:57much lower productivity and said there78:59we should be able to see clear evidence79:01that the minimum wage cost jobs and he79:03couldn’t find it he said I don’t really79:05believe this by79:06I can’t find the evidence so so for the79:09moment I say let’s let’s go for 15 and79:11see what happens and then maybe maybe79:15look for the high productivity states to79:20to go beyond that great I’m so sorry to79:24have to draw it to a conclusion but you79:27will have the opportunity to meet ball79:29and and get the book signed for now79:32please join me in thanking him for79:34really fascinating today all right