Extreme wealth is toxic

No sooner had the ink dried on Ingrid Robeyns’ book Limitarianism than a bunch of billionaires took control of the US, the world’s richest and most powerful country. They immediately set out to redesign public policies and institutions in their own interest or rather in the interest of their class, the super-rich. This involved, first and foremost, eroding, if not dismantling, barriers to the accumulation of wealth: regulatory bodies, environmental safeguards, affirmative action, redistributive taxation, social security, you name it. It also involved more imaginative projects such as taking over Greenland, raiding Ukraine’s mineral resources, and converting the Gaza strip into a luxury resort. All this, of course, was done in the name of ordinary Americans.

Disturbing as these events may be, Robeyns could not have dreamt of a better vindication of her claim that extreme wealth is a threat to democracy. This is self-evident: democracy demands an equitable distribution of power, and the super-rich have far too much of it. That alone is a strong argument for limiting extreme wealth. As Robeyns argues at length, however, extreme wealth is toxic, not just for democracy but also for society, the environment, human values, and perhaps even the super-rich (or their children) themselves.

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Robeyns has left no stone unturned in her plea against extreme wealth. Each objection to it is the subject of an entire chapter. The counter-arguments are acknowledged and methodically rebutted. The concluding chapter presents a constructive outline of possible steps towards a limitarian society.

The book is also a useful introduction to a vast literature on the philosophical, economic, social, political, and psychological aspects of extreme wealth. Being unfamiliar with this literature, I particularly enjoyed learning new concepts such as affluenza (the psychological damage of extreme wealth), wealth defence (a whole industry dedicated to the protection of extreme wealth), and prosperity theology (roughly, the idea that God wants you to be rich). The endnotes are a valuable resource on their own.

Overall, Robeyns’ “case against extreme wealth” is very persuasive. The loose end is a half-baked response to the idea that in a market economy, extreme wealth has an economic function. This idea usually takes the form of the “incentive argument” for tolerating extreme wealth: a limit on extreme wealth would discourage innovation and risk-taking. There is, indeed, a widespread belief that the investments, innovations, and ventures of the super-rich contribute to the prosperity of the economy as a whole. In India, billionaires are increasingly referred to as praiseworthy “wealth creators”. Even if this is just propaganda, it needs to be countered.

Limitarianism does include a brief discussion of the incentive argument, but it is not entirely convincing. The author’s principal counter-argument is that most of the super-rich “no longer work for money” but rather for “status, networks and power”. That may be true, but if money enhances their power, then greed for power would still translate into greed for money even if they are not interested in earning more money per se. Surely that helps to understand the remarkable fact that so many billionaires actually do want even more, and “work” for it.

Further, even if money loses its attraction beyond a point, the possibility of becoming super-rich surely has strong motivational power for some people. But this is not necessarily a good thing. This motivation can induce people to do all sorts of thing—not just invest or innovate but also commit crimes, plunder the environment, dodge taxes, seduce politicians, evade regulations, meddle with government policy, or manipulate public opinion. I am not talking of illegal activity alone: much of this can be done well within the bounds of the law.

Here we find a better counter, I think, to the incentive argument: the prospect of extreme wealth creates positive as well as negative incentives, and there is no evidence (or reason to believe) that positive incentives dominate.

Even if positive incentives dominate, of course, that would not be a definitive argument against limitarianism. If we care for an equitable distribution of resources and power, we should be willing to pay a price for it. After all, the purpose of an economy is not just to create wealth or material comfort. It is also to help create a good society.

In spite of her intense and well-argued aversion to extreme wealth, Robeyns does not insist on a straight cap on extreme wealth as a possible solution. Her approach is much broader. As she puts it, “limitarianism is a moral principle that should, first of all, guide the design of our economic and social institutions, and, secondly, our own personal decision-making”. She calls for three kinds of action: structural action (away from neoliberalism), fiscal action (including redistributive taxation), and ethical action (the adoption of a limitarian ethos). None of this, of course, will happen overnight.

In the concluding chapter of the book, Robeyns presents a more specific, nine-point framework for action. Many of these points (for example, “dismantle neoliberal ideology”, “reduce class segregation”, and “make the international architecture fair”) are distant goals more than action points, but Robeyns does give useful examples of how they can be pursued. Among the practical steps floated in this concluding chapter are a national civil service requirement, protecting trade unions and other forms of countervailing power, abolishing tax havens, limiting executive pay, higher taxation of capital gains, and—her parting appeal—a cap on lifetime inheritance.

The need for a wealth cap

All these proposals are well taken. The question remains, is it not possible to add to this a straight wealth cap? Curiously, this question is not addressed in the concluding chapter. Two separate issues arise here: desirability and practicality. The desirability of a wealth cap may be contested on the ground that it would have adverse incentive effects, including possible capital flight (if it applies at a national rather than global level). But here again, the incentive effects could go either way. Perhaps the proof can be sought in the pudding, starting with a high cap—say one billion dollars—to play safe. One billion dollars is a humongous amount of money (“an absurd amount of wealth”, as none other than Melinda French Gates put it in a recent CNN interview), it is very doubtful that the economy would suffer any serious damage if everyone were to be prevented from having more. If anything, I would expect the redistribution of wealth to stimulate the economy.

Practicality, of course, is a serious issue. A wealth cap, for instance, would require much greater transparency of wealth. But that would be a good thing in any case. Lack of wealth transparency reflects a dubious notion that wealth is a private matter. In fact, rich people are in possession of a public resource (a portion of society’s collective output) that happens to have come their way by virtue of market processes that have nothing to do with who deserves what. Often, their wealth builds on fraud, exploitation, or environmental vandalism. Further, money is a source of power, which can always be misused. Seen in this light, it seems reasonable to require the super-rich to disclose their wealth. Even with greater transparency, a wealth cap would raise important practical issues, related for instance to the volatility of wealth, the possibility of “proxy” wealth, and the danger of capital flight. But there is no reason to assume that these obstacles cannot be dealt with. The practicalities of a straight wealth cap deserve serious study and debate, at the very least.

A wealth cap does not necessarily mean that anything in excess of the cap would be confiscated by the state. The super-rich could also be allowed to donate some of their excess wealth, with due safeguards. Robeyns does not exclude a straight cap on wealth, but nor does she discuss it in any detail, and the final chapter skips this topic altogether. This is a curious omission in a book so committed to preventing extreme wealth in one way or another—all the more so as Robeyns does advocate limits on executive pay, and also a “maximum wage”, suggesting that she is not averse to straight caps in general.

If not a wealth cap, other forms of direct restraint on extreme wealth are worth considering (and are indeed considered in Limitarianism). With the world facing an imminent survival crisis due to climate change, would it be unreasonable to ask the super-rich to contribute? As Prabhat Patnaik, Thomas Piketty, and others have shown, a moderate one-off tax on the largest fortunes could generate huge revenue, given the gigantic nature of these fortunes. It would be all the more justified as extreme wealth today is largely a product of the carbon economy and other forms of environmental vandalism.

One argument against a straight wealth cap is that it is better to tax than to cap because a tax generates some public revenue in the bargain. But it seems to me that if we are serious about the toxic effects of extreme wealth, it needs to be scuttled somewhere along the line. The wealth of the super-rich has already reached grotesque levels, and the way things are going, the day may not be very far when the world has some trillionaires. The power that would come with this sort of wealth is fundamentally objectionable, as is the power of a billionaire for that matter. It would be like allowing private ownership of nuclear bombs.

Even if a straight wealth cap is feasible in principle, it is not going to happen in a hurry. For one thing, the super-rich will resist it tooth and nail. For now, we can only do our best to take the idea forward. That, in any case, applies to most of the action points proposed in the concluding chapter of Limitarianism.

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In practical terms, a return to steeply redistributive taxation is far more likely than a wealth cap, at least for now. We have been there before: many countries, including the US, had very high marginal tax rates at the top in the third quarter of the 20th century. Their economies were mostly doing very well in those days, and the super-rich did not flee or revolt. They did look for tax havens, but those can be substantially abolished—the recent introduction of a “global minimum tax” on corporate profits has shown the possibility of global action against tax avoidance. Redistributive taxation would fall short of a straight cap, but it could sharply reduce the need for a cap.

Ultimately, the best way of driving out extreme wealth is to prevent it from emerging in the first place. One of the best-kept secrets of mainstream economics is that many enterprises can be owned and operated by workers themselves, with the help of elected managers, if need be. With a supportive environment of the sort that has enabled cooperatives to flourish in Mondragon (Spain) and Emilia Romagna (Italy), democratic enterprises could become the norm rather than the exception. A more equitable distribution of inherited wealth would further expand the scope for this sort of enterprises. That would drive out extreme wealth from substantial sectors of the economy at least. It would also go a long way towards creating a more decent society.

The US businessman Clint Murchison Jr famously said that money is like manure: “If you spread it around, it does a lot of good, but if you pile it up in one place, it stinks like hell.” We are indebted to Ingrid Robeyns for a methodical exposé of the toxic aspects of extreme wealth. How to spread it is not just an academic question but also a matter or learning by doing. 

Jean Dreze is Visiting Professor, Department of Economics, Ranchi University.

This review was initially published in TheJournal of Global Ethics, Volume 21, Issue 2 (2025).