Book review: Winners take all

Book Review: Winners Take All: The Elite Charade of Changing the World, by Anand Giridharadas (Knopf Doubleday, 2018)

Anand Giridharadas, TED talking-head, columnist, and former McKinsey consultant has used his insider status as a “thought-leader” in the world of the Davos elite to lob a bomb among them. The subtitle gives the flavour: “The Elite Charade of Changing the World”.

As the elite fly into Davos to discuss climate change or meet on a luxury cruise ship in the Bahamas to mull global poverty, they are an easy target for Giridharadas. Recording their extravagances, rationalisations, inconsistencies, and self-satisfaction takes up much of the text. If you like poking fun at pretensions, you’ll enjoy this.

But Giridharadas is not interested only in the social interactions of the elite. Nor is he much interested in recording how they got their wealth. Instead, his interest is how they use it to try to make the world a better place.

Andrew Carnegie’s century-old “Gospel of Wealth” provides a starting point. The raw competition of untrammelled capitalism is the powerful dynamic that drives production. If one industrialist took a softer approach (say, by paying workers more), that producer would make less profit and would in time be displaced by a more ruthless competitor. Once earned, however, the profits should be given away: “I should consider it a disgrace to die a rich man”.

Recall Adam Smith:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.

David Hume would remind us of the benefits of free trade: these are voluntary exchanges, which must make both parties better off. In short, “win-win” has always been a central theme of economics.

By the 1980s, Margaret Thatcher noted that “there is no such thing as society”. Ronald Reagan identified the nine most terrifying words: “I’m from the government and I’m here to help”. Free markets had won the economic debate.

Technology has added a further element, broadening competition geographically and greatly increased the advantage of scale – enhanced by the “winner-takes-all” of network effects. Conglomerates and de facto monopolies are acceptable.

With all this in mind, it’s hardly surprising that the elite of this free-market system – these hugely successful, mostly self-made entrepreneurs – are comfortable with the idea that their wealth is a just reward for their entrepreneurship. Like Carnegie, their philanthropy is not driven by a guilty conscience about the manner of accumulation. They don’t feel personally responsible for the maldistribution of income and other deficiencies in current America. Their desire to do good is not an atonement for earlier sins.

Some give charitable donations. Others build public infrastructure – museums and libraries – as memorials to themselves.

Giridharadas’ special interest is benefactors who want to promote enterprise among the poor, rather than just give them handouts. This is the favourite focus of Silicon Valley’s tech billionaires and their counterparts in finance.

These entrepreneurs often see the business formula that worked for them as a universal panacea for poverty and society’s other ills.

All the poor need is technical advice and some capital. By transferring a little of their expertise, the benefactors will address society’s problems without cost to themselves and bask in the praise of like-minded benefactors. What a win-win!

What’s so bad about this? For Giridharadas, the problem is that these benefactors have narrowed the array of options and want to dictate the outcomes. They don’t want to do anything which would threaten their own favoured position. Like Lampadusa’s embattled nobleman in The Leopard, they want change only “so that everything can remain the same”.

Like Carnegie, modern entrepreneurs can’t contemplate softening their own management to provide, say, better wages and security for “gig workers”: this would undermine the dynamism of competition. Their monopoly positions are justified as technically inherent. They talk of poverty reduction, but not the reduction of inequality. Higher taxes (or even reduction of the many distortions which favour the elite) are not part of the agenda. All the proposals are win-win: none of the elites lose personally.

The elite focus on the narrow agenda at the micro-level (usually a new business enterprise or foundation), when what is needed is systemic change. Systemic change requires politics, not another meeting in Aspen. And it is rarely win-win.

Having broached the topic of politics, Giridharadas doesn’t say much about the way politics has been subverted by the wealthy. The elites are not politics-free, relying solely on the free market for their success. They use their considerable political power to advance their interests. Should we be surprised by this? Only to the extent that the political system allows them to have a much louder voice than others.

That raises the awkward question of how Americans, each armed with a vote, have failed to use this to bring about the required systemic changes: progressive taxes to reduce inequality, tight limits on political donations and lobbying, equal education opportunities, minimum-wages, and an effective social safety net, including for health. When Donald Trump is the outcome of the political process, the deficiencies identified by Giridharadas seem beyond political solutions.

Undoubtedly, America has many challenges. But has the market-based system really turned out so badly? Hasn’t post-war globalisation lifted a billion people out of poverty, even as it made lots of billionaires and created some losers? Are successful entrepreneurs solely responsible for the overall failings of the political system?

More specifically, would the world be a better place if Bill Gates and George Soros were spending their fortunes building civic memorials instead of fostering enterprise, social initiatives, and political reform? Have their efforts really diverted more deep-seated systemic reforms?

Even with all their own delusions and conceits, these business-oriented benefactors may still be net-positive for welfare.

Stephen Grenville