tom@tommccallum.com

book online meeting

+44 7583 584325

Income inequality – history is a teacher

by | Feb 20, 2019 | Beautiful Leadership, Open Leadership

0106-ainequity-richest-getting-richer-g1_full_600

Look up income inequality and you’ll see chart after chart showing how this has radically increased since the early 1980s.

To me this has to change, it is simply ugly leadership for the richest to earn so much more than others.

For today, let me write about the rabid backlash against the proposal to create a marginal tax rate in the USA of 70% on earnings over $10,000,000, then show you how ludicrous that backlash was made to look by simple references to history.

So, how wealthy are you if you earn $10,000,000 or more?

Are you in the top 1%? top 0.1%?

No, if you earn $10,000,000 per annum you are, according the global rich list calculator, in the top 0.0002% in the world, or 12,833rd richest person on earth.

Is it really fair for you to not pay a higher share in taxes?

Well, at the recent Davos gathering called the World Economic Forum, a certain billionaire spoke vocally about how he did not support the proposal, then watch what happened in this short clip:

A full article on this in the Washington Post is here , with this excerpt:

“..computer executive Michael Dell — who has a net worth of $28 billion — reportedly laughed off calls by Rep. Alexandria Ocasio-Cortez (D-N.Y.) for a 70 percent marginal tax rate for income above $10 million, and challenged the audience to “name a country where that’s worked. Ever.” 

Economist Erik Brynjolfsson was also on the panel and, to his credit, quickly met Dell’s challenge with one prominent place: the United States.

From 1913, our average top tax rate was about 60 percent, then from the 1930s to the 1980s, the top tax rate ranged from about 60 to 90 percent (today’s top tax rate is 37 percent). Such high top rates “worked” in the sense that they did not obviously dampen growth, which was on average stronger in those years than since, when rates have been lower — a pattern that holds for various other countries as well. To be clear, this is correlation, not causation, but Dell’s point was nonsense.

Unless he meant such tax rates “don’t work” for him and other denizens of the wealth stratosphere. If so, his point is revealing. Dell’s wealth places him near the top of the top 0.001 percent.”

To me, this level of income inequality is indeed “ugly leadership”. What is more, it links to my thinking on the need for us to rethink (as I wrote recently) the purpose of the corporation. Beyond a certain level, there has to be more to life than maximising shareholder return and the rich to get ever richer, the world to get more unequal.

Please don’t misunderstand me, I am a believer in business, and in particular as business as a force for good. I simply believe that we are stuck in paradigms so hardened that we do need radical change if the current wave of populism is not to destroy the livelihood of so many around the world (and, almost always, those who can least afford any economic hits).

How hardened, how stuck are we in those paradigms? Well, one clear indication is when that billionaire, Michael Dell, holds to a line that we cannot have a 70% tax rate for the very richest in the world otherwise they may sulk, take their ball and go play elsewhere (ie allocate their capital to somewhere that taxes them less).

People around the world have lost faith in CEOs, in business, in capitalism. This is a big contributor to why we are seeing the rise in extremist “populists”, who play to this loss of faith in the economic systems that did indeed radically increase living standards and wellbeing for so many years, yet over the llast forty or so years have simply not done so for any but the richest in society.

Ok, today I was on my soapbox. If you want to move your own leadership and your business towards making a greater contribution to the planet, talk to me, those are my clients. Oh, and you know what? Often those businesses actually make even more profit than before. Magical alchemy that, once you understand the simple reasons why this works, feels totally obvious. Curious? Talk to me.