Cooking the Books 1 – Be they dragons?
In the November/December issue of the Skeptical Inquirer, Benjamin Radford dealt with a question ‘What do you make of the memes going around comparing billionaires to hoarding dragons and monkeys? Are billionaires hurting the world by hoarding their obscene wealth?’ He answered that billionaires were not like the dragon Smaug in The Hobbit who slept on a hoard of gold as they did not literally ‘hoard’ their wealth. Although he appears to be a supporter of the world as it currently is he made a couple of valid points.
First, that much of the wealth of billionaires is not actual, tangible wealth like gold.
‘Ultra-rich people don’t literally own billions of physical dollars in the way that Smaug physically sits on gold and treasure. Instead, owning five billion dollars and being worth $5 billion on paper are two different things. That’s because the value isn’t tangible. It’s not a zero-sum game in which if you have something (say a house, car or $100 bill) that, by definition, means someone else does not have it. In the case of wealth, a person can (and usually does) get rich when the value of a company’s stock increases. But that increase doesn’t mean that someone else loses money or value if the value of your stocks goes up by $100.’
Radford presents this as a difference between ‘money’ and ‘wealth’, between money as a store of wealth and the price of what a person owns. There is a difference here but between wealth (properly understood as physical things that have a use) and its price. The price of some item of tangible wealth can go up (or down) without affecting the ownership of that wealth. If it goes up, this is a ‘capital gain’ for the owner.
In the case of stocks and shares, what is being bought and sold is not even anything tangible, but the right to draw an income from the production of future tangible wealth, more precisely the expected profits to be made from this. Marx called this ‘fictitious capital’ but a more immediately understandable term might have been ‘notional capital’.
The riches of super-rich individuals like Musk and Bezos are mainly in the form of stocks in the corporations they own. If the price of these goes up then they get richer. Recently, due largely to the quantitative easing, there has been a boom in the price of stocks and shares, resulting in the rich and super-rich getting richer. Thus, calculations have been made of how much Musk’s riches have been increasing per day. It’s $49,439,601 (tinyurl.com/msf5tjf8).
These capital gains don’t represent any increase in real, tangible wealth. Radford is correct in pointing out that they don’t represent wealth that can be hoarded or could be redistributed to others. They don’t deprive anybody of anything. But this doesn’t mean that all the wealth of billionaires exists only as ‘notional capital’. They also have a share of property titles to real tangible wealth, the physical assets (buildings, equipment) of the corporations that they have shares in. They are part of the class that monopolises the means that society needs to use to survive.
Which brings us to Radford’s second point, that hoarding is ‘the last thing that they want to do with their money’:
‘They neither have nor hoard treasure but instead invest their wealth in businesses, which in turn buy equipment and hire employees’.
Exactly. What they want to do with their money is to invest it with a view to making more money. Which is the opposite of hoarding. Unlike ‘capital gains’, profits represent real wealth, a monetary reflection of one part of the real, tangible wealth that employees produce.
Billionaires can be acquitted of the charge of behaving like dragons. But not of being part of the class that monopolises the means of production, to the detriment of the rest of us.