Branko Milanovic (the guru of global inequality) has made the intriguing suggestion that someone should seek to quantify the extent to which multi-billionaires acquired their wealth through socially valuable activities. He suggests that we should take the top 1,500 billionaires in the world and rate each on the extent to which their wealth was “acquired through activities that benefited other people in the world”. So those who develop innovative products and services, or find economic or enjoyable ways to deliver these, will score highly. On the other hand, hose who inherit their money, exploit monopolies or political influence, or merely extort rents will score poorly.
I am wary of giving these scores too much normative significance. Milanovic claims that “No rational person can be against people who through their effort or brains, inventions, innovations or hard work, have become rich by improving also our lives”. But the philosopher G.A. Cohen developed at some length the counter-argument that even if it is socially necessary to hold our noses and pay the capable and talented more money, we shouldn’t lose sight that they are not morally owed such privilege. To put it another way, I am not sure that identifying the ‘undeserving rich’ is any more helpful than sniffing out the ‘undeserving poor’.
Nevertheless, Milanovic’s scheme would be an interesting and informative exercise. However, I worry that his approach would tend to systematically overstate the value of the super rich. To appreciate a person’s real importance to society, we ought to consider their replaceability. If another person could do same things as them, equally well, then this suggests they do less to improve society than somebody whose contribution could not easily be replicated. Consider an analogy. A football team has two star players – their goalkeeper and their centre forward. However, they have a very good substitute goalkeeper, but no other effective forwards in their squad. It follows that the forward is more important to the team, even if the goalkeeper might be a slightly better player.
Replaceability matters because much of the rhetoric that justifies extreme wealth is couched in those terms. It is only by claiming that they have special and unusual talents and abilities that multi billionaires can legitimate being so much wealthier than the rest of society. And it is only by insisting on their irreplaceability that they can hold societies and governments to ransom – for example, on tax rates.
Furthermore, there is reason to believe that the replaceability of the ‘wealth creators’ in the global super-rich is likely to be underestimated. Academic research into cognitive biases and the randomness of corporate success suggest that the perceived contribution of individuals to the success of their organisations is likely exaggerated.
Thus while Milanovic’s proposal is a good start, it needs to be developed and supplemented before we get a proper account of the value of the global 0.01%.