The super-rich don’t really need to listen to anybody’s advice. But it might be in their interest to give an audience to Pope Francis, even if they’re not Catholic, don’t believe in God or don’t give two shekels about the poor.
Pope Francis, of course, is an advocate for the underdog who has weighed in before on economic matters, including the vast gap between the world’s rich and poor. And now, with bankers, CEOs and other 1 percenters gathering in Davos, Switzerland, for the World Economic Forum’s annual glitzfest, Francis has issued another message meant to draw attention to “the economic crisis affecting the world these past few years,” as he describes it.
The world’s wealthy, Francis says, “have a precise responsibility towards others, particularly those who are most frail, weak and vulnerable. It is intolerable that thousands of people continue to die every day from hunger, even though substantial quantities of food are available, and often simply wasted.”
The pope ladled out a bit of praise for people who have succeeded in business, which he calls “a noble vocation.” Then he challenged those same people: “Those who have demonstrated their aptitude for being innovative and for improving the lives of many people by their ingenuity and professional expertise can further contribute by putting their skills at the service of those who are still living in dire poverty.”
Shrewd use of the bully pulpit
Francis is hardly the first to highlight the growing problem of income inequality that grips the United States and many other developed nations. But he’s making shrewd use of his bully pulpit to highlight the issue as it’s becoming a casus belli for social activists. The pope’s appeal, for instance, came right on the heels of a report by the anti-poverty group Oxfam that contained this catchy statistic: The 85 richest people in the world control more wealth than the bottom half of the world’s entire population, or roughly 3.5 billion people. The WEF itself has even said the gap between rich and poor is the biggest threat to the global economy in coming years.
The glitterati gathered at Davos may wonder what all the fuss is about, since there’s certainly no economic crisis on their doorstep. But they could ultimately suffer, in the way the rich suffer, if the wealth gap continues to grow with no redress for the world’s needy.
There have been popular backlashes before against the excesses of the wealthy, even when there was a plausible case that the pursuit of wealth itself improved the lot of the unwealthy — as many capitalists argue today. The rise of “robber baron” industrialists in the late 19th century accompanied terrific new innovations that helped everybody, such as long-distance railroads, household electricity, and many time- and labor-saving inventions. But greed and excess, whether real or perceived, also led to the institution of the income tax, tougher federal regulation on businesses and perhaps the greatest scourge free-market capitalists could ever imagine — labor unions.
In the 1930s, the desperate plight of the common man allowed FDR to successfully vilify the wealthy and eventually raise the top marginal income tax rate above 90%. Conversely, during the 1980s and 1990s, the relative prosperity of the middle class helped justify a gradual reduction in tax rates that may have benefited the wealthy most of all.
The vulnerable rich
The rich certainly look vulnerable to tax hikes and different types of stiff regulation today. The top U.S. marginal income tax rate, at 39%, is far lower than it was during the 1950s and ‘60s, so there’s plenty of precedent for higher taxes on the wealthy. And with the national debt ballooning, there are likely to be tax hikes on somebody before long.
There’s also broad recognition that the hundreds of loopholes in the tax code benefit wealthy filers able to hire good lawyers and accountants, while middle-class families enjoy few tax dodges, if any. One unexpected turn in the economy might be all it takes to muster a critical mass of angry citizens bearing pitchforks.
The wealthy have crony capitalism on their side. By some measures, American democracy these days is more captive to the vested interests of a privileged few than it has been in decades, thanks to increasingly porous campaign-finance laws and a lobbying climate in Washington that some critics equate with legalized corruption. Still, Wall Street cronies on Capitol Hill have been unable to prevent new regulations on banks under the Dodd-Frank law or a flurry of government lawsuits dating to the 2008 financial meltdown. Meanwhile, Americans elected a socialist over a capitalist in the last presidential election, if you believe the way capitalists characterized their own defeat.
While bankrolling like-minded candidates who favor low taxes and light regulation, the wealthy might also back a few enlightened policies meant to help those with less income to tax and no business interests to regulate. New programs that provide high-tech training for blue-collar workers or fresh jobs rebuilding infrastructure might return more than they cost to the U.S. economy, making everybody better off. Tax reform could jump-start the economy if it lowered rates and closed a lot of the loopholes that save the wealthy a million dollars here and there. And let's just say it — the rich can afford a tax increase, even if the money is used for some dim-witted redistributionist scheme that doesn't incentivize work. Presumably, the wealthy would prefer a small, pre-emptive tax hike now to a big, punitive one later.
The pope, for his part, is optimistic. “I am convinced,” he wrote, “that … a new political and business mentality can take shape, one capable of guiding all economic and financial activity within the horizon of an ethical approach which is truly humane.” What's good for your soul might be good for your wallet, too.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success . Follow him on Twitter: @rickjnewman