SINGAPORE (May 6): In Beverly Hills, the chicken Caesar salad costs US$25.95 ($35.35). Stephen Schwarzman, with a net worth of US$14.3 billion, could buy one for all 329 million people in the US today — and then do so again tomorrow for 222 million of them.
The wealth on display at the annual Davos-style conference organised by Michael Milken, once of junk-bond fame, is capturing a moment in our age of growing inequality. For the first time in Milken Institute Global Conference’s two-decade-plus history, Schwarzman and the other billionaires and mere multimillionaires here find themselves confronting uncomfortable questions about the source of their wealth: modern American capitalism itself.
It is not a huge surprise that billionaires find themselves on the hot seat this year. It is, after all, the first Milken conference following the rise of Congresswoman Alexandria Ocasio-Cortez, a self-described socialist who has rocketed to national fame. Senator Bernie Sanders, who also holds socialist views, is running for president. Lawmakers are grilling bank chiefs over the gap between the tens of millions they take home and the fraction made by their rank and file. And national debates are raging over access to healthcare, affordable housing and university degrees free of crushing debt.
The conference reflects Michael Milken’s relentless ambition to become the ultimate problem-solving capitalist. Panellists and attendees include bankers, investment managers, politicians, entrepreneurs, entertainers and athletes. The theme of this year’s gathering is “Driving Shared Prosperity”. The concern: Those outside the Beverly Hilton may not feel the prosperity is all that shared.
“If you look at the right wing and the left wing, what’s really coming is class warfare,” says Alan Schwartz, a managing partner at investment firm Guggenheim Partners. His colleague Scott Minerd, the firm’s chief investment officer, says “the disparity in wealth is so extreme, it’s feeding populism”.
The gathering lures an unusual concentration of wealth, with at least 11 of its speakers listed on the Bloomberg Billionaires Index, with a combined net worth exceeding US$100 billion. In a year when billionaires are hot political targets, income inequality was on the minds of many speakers and attendees.
Some expressed concern about the potential economic impacts of the growing gap between the rich and poor. Others defended the capitalist system and dismissed proposed solutions, such as raising taxes on the wealthy. “Soaking the rich doesn’t work,” says Ken Griffin, the billionaire founder of investment firm Citadel.
Griffin himself has been the focus of a debate on taxing the wealthy. A proposed tax on so-called pieds-a-terre gained traction after Griffin, who lives in Chicago, purchased a 24,000 sq ft Manhattan penthouse for a record US$238 million, making it the priciest US home. The planned levy was eventually replaced by a one-time mansion tax that is considered a less-onerous alternative.
His comments contrast with those of billionaire Ray Dalio, who last month sounded the alarm on capitalism’s flaws and advocated for some higher taxes on the wealthy, among other solutions.
The Bridgewater Associates founder says the country has to agree on a way to promote the lower half of the population to keep the American Dream alive.
“If we don’t agree, we’ll have some form of a revolution that would be to abandon capitalism, to go to the opposite extreme,” Dalio says. “If you have a population where there’s a large wealth gap and you have an economic downturn, it’s almost reliably there is conflict.”
