Not Just Warren and Sanders. 

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Dear John,

Billionaires are wailing that wealth tax proposals by Elizabeth Warren and Bernie Sanders are attacks on free-market capitalism. Warren “vilifies successful people”, says Jamie Dimon, chief executive of JPMorgan Chase.

Rubbish. There are basically only five ways to accumulate a billion dollars, and none of them has to do with being successful in a genuinely free market: Profiting from a monopoly, insider-trading, political payoffs, fraud and large amounts of inherited wealth. ([link removed])
Jamie Dimon is worth $1.6 billion. That’s not because he succeeded under free-market capitalism. In 2008, the government bailed out JP Morgan and four other giant Wall Street banks because it considered them “too big to fail”.

That bailout is a hidden insurance policy, still in effect, with an estimated value to the big banks of $83 billion a year. If JP Morgan weren’t so big and was therefore allowed to fail, Dimon would be worth far less than $1.6 billion.

Insider trading is endemic in C-suites, too. SEC researchers have found that corporate executives are twice as likely to sell their stock on the days following their own stock buyback announcements as they are in the days leading up to the announcements.

Another way to make a billion is to buy off politicians.

The Trump tax cut is estimated to save Charles and the late David Koch and their Koch Industries an estimated $1 billion to $1.4 billion a year, not counting their tax savings on profits stored offshore and a shrunken estate tax. The Kochs and their affiliated groups spent some $20 million lobbying for the Trump tax cut, including political donations. Not a bad return on investment.

Other billionaires have made their fortunes extorting investors. Adam Neumann persuaded JP Morgan, SoftBank and other investors to sink hundreds of millions into WeWork, an office-sharing startup. He used some of the money to buy buildings he leased back to WeWork and to enjoy a lifestyle that included a $60 million private jet. WeWork never made a nickel of profit.

The easiest way to be a billionaire is to get the money from rich parents or relatives. About 60% of all the wealth in America today is inherited, according to estimates by economist Thomas Piketty and his colleagues.
Capitalism doesn’t work well with monopolies, insider-trading, political payoffs, fraud and large amounts of inherited wealth. Billionaires who don’t like Sanders and Warren’s wealth tax plans should at least support reforms that end these anti-capitalist advantages.

Thanks for reading,
Robert Reich

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