Inspired by my upcoming book, The Optional Society, with Marco Aliberti (Ex Tuto):
‘You can never be too rich or too thin’ was the statement of the late Duchess of Windsor. Both assumptions are wrong. The latter is disproven by anorexia, the first by Amazon and brethren.
Let us stay on ‘too rich’. The value of Amazon has almost doubled over the 15 months of the corona crisis. It currently stands at 1.6 trillion dollars and will not shrink hereafter! The activities of Amazon not only deepen – they broaden. This is a natural consequence of economic theory. The abundance of capital must be allocated and there are only two choices: to give back to shareholders or to deploy to new activities. Giving back to the owners is pusillanimous and hence the quest for new fields of business activity is mostly preferred. Where banks use other people’s money for other people’s activities, mega-firms use their own money for their own activities. Their incredible wealth means that there is almost no entry threshold for these firms to enter new fields. Their acumen in managing a new type of activity must not pass the crucible of third party capital allocation like start-ups. Mega-firms become planned economy instruments, albeit not of the communist type. Managers need not consider the general good of society. This may be conducive for efficiency but is a far cry from Adam Smith and liberal economics.
The general good is in this model supposed to be taken care of by the political decision makers, and by and large they have so far had the tools, but not always the ability, to exercise the function. But imagine Amazon at three times its current size. It will have branched into currency, health care, security, education, and deeper into news and entertainment. It will have reached such compact power that no state will have the de facto ability to rein it in. But not only that. Companies like Amazon will increasingly replace the state by providing most of what the state currently offers or ensures: retirement benefits (as a financial institution and as large-scale employer), policing, health care and hospitals, funding of new medicines, going to the Moon, you name it! All the while, the human factor in economic activity will become more and more irrelevant because of automation and AI. Wealth will therefore inevitably amass with the owners of the means of production.
What we are experiencing, and will so even more in the future, is that authority increasingly moves from the state to private actors like Amazon. The state will become ever more emasculated and will ultimately not be able to fulfil its role of ensuring fairness and solidarity in society.
In order to avoid such an outcome in the incredibly wealthy world we are moving towards, we have to ask ourselves the impossible question: should it become illegal to become too rich? Should a company with a market value of a trillion dollars or more be deprived of the option to further expand – and hence be forced to return excess capital to shareholders, who would then have to find other vehicles for investment?
There is an antitrust logic in this, although such a proposal goes far further than just regulating monopolistic activity. Capital itself becomes the regulated object.
If we do not start to entertain this question we will, knowingly, have sacrificed the state and its benefits on the altar of an Adam Smith who, being a moralist as well as an economist, would never have imagined that his liberal economics could be taken to advocate such an illiberal result.
But in the interest of full disclosure it should also be said that where this regulatory screw ends is with the question whether personal wealth should have a limit also. When Jeff Bezos becomes a trillionaire must he be forced to give back to the society that enabled him all the further wealth beyond that measly first trillion?