Daron Acemoglu: Can the world escape a new gilded age?

What matters even more than simple wealth is that these billionaires are viewed as entrepreneurial geniuses who exhibit unique levels of creativity, daring, foresight and expertise on a wide range of topics. 

Add the fact that some of them control major means of communication—namely, key social-media platforms—and you have something almost unparalleled in recent history.

The image of the rich, brave businessman who transforms the world can be traced back at least to the robber barons of the Gilded Age. But one of the main sources of its contemporary popular appeal is Ayn Rand’s novel Atlas Shrugged, whose protagonist, John Galt, strives to re-create capitalism through the sheer force of his idealism and will. 

While Rand’s novel has long held canonical status with Silicon Valley entrepreneurs and libertarian-leaning politicians, the influence of its central archetype is hardly confined to those circles. From Bruce Wayne (Batman) to Tony Stark (Iron Man), rich, tech savvy innovators who save the world from disaster are a staple of popular culture.

Power of the purse: Some will always have more power than others, but how much is too much? Once upon a time, power was linked to physical strength or military prowess, whereas now its perquisites usually stem from what Simon Johnson and I call “persuasion power,” which, as we explain in our book Power and Progress, is rooted in status or prestige. The greater your status, the more easily you can persuade others.

The sources of status vary across societies, as does the extent to which it is unequally distributed. In the US, status became firmly linked to money and wealth during the Industrial Revolution, and income and wealth inequality skyrocketed as a result.

While there have been periods in which government intervention sought to reverse the trend, US society has always had a steep status hierarchy.

This structure is problematic for several reasons. Constant competition for status is largely a zero-sum affair, because status is a ‘positional good.’ More status for you means less status for your neighbour and a steep hierarchy implies that some people will be happy while many others are unhappy. 

Moreover, investments in zero-sum activities tend to be inefficient and excessive compared to those in non-zero-sum activities. Is it better to spend on Rolex watches or learning new skills? Both may have intrinsic value, but the former merely signals wealth. 

The latter, by contrast, ups your human capital and may also contribute to society. The first is largely zero-sum, and the second is largely non-zero-sum.

The dictatorship of dilettantism: There are both evolutionary and social bases for linking persuasion power to status and prestige. After all, it is individually rational to learn from people who have expertise and reasonable to link expertise with success. 

This form of learning is good for communities as it facilitates coordination and a convergence towards best practices. But when status is linked to wealth, and wealth inequality grows large, the foundation that underpins expertise starts to crumble.

Consider a thought experiment. Who has greater expertise on carpentry—a professional master carpenter or a hedge-fund billionaire? It seems natural to pick the former; but the more that wealth confers status, the greater the weight attached to hedge-fund billionaires’ views, even on carpentry. Or consider a more relevant example. 

Whose views on freedom of speech carry more weight today, a tech billionaire or a philosopher who has long grappled with the issue and whose evidence and arguments have been subjected to scrutiny by other qualified experts? Millions of people on X have implicitly chosen the former.

The deeper we are drawn into the ‘wealth-is- status’ equilibrium, the more we may come to accept the supremacy of tech billionaires. Yet it is difficult to believe that wealth could be a perfect measure of merit or wisdom, let alone a useful proxy for authority on carpentry or freedom of speech. Moreover, wealth is always somewhat arbitrary.

If the tech sector had not become so central to the economy, and if it was not driven by such strong winner-take-all dynamics (which is partly a matter of choice about how we organize certain markets), today’s tech tycoons would not have become so rich. 

The fact that Gates and Musk have been taxed less does not make them any wiser, but it certainly has made them wealthier, and thus more influential.

Power corrupts: Such figures also benefit from an even more pernicious dynamic that Johnson and I explore in Power and Progress, using the example of Ferdinand de Lesseps. He gained enormous status in late 19th-century France for his completion of the Suez Canal in the face of British opposition to the project. 

He had foresight and skilfully convinced politicians in Egypt and France that maritime trade would become important. But he was also lucky: the hoped-for technologies that he needed to build the canal without locks were developed just in time for the project.

With his Suez victory, Lesseps gained great prestige. But what he did with his new status is instructive. He became reckless, unhinged and cocky, pushing the Panama Canal project in an unworkable direction that ultimately led to the deaths of more than 20,000 people and the financial ruin of many more, including his own family. Like all forms of power, persuasion power can make one hubristic, unrestrained and socially obnoxious.

Lesseps’s story remains relevant because it has echoes in the behaviour of many billionaires today. While some of America’s wealthiest do not use their status to influence critical public debates (think Warren Buffett), many do. 

Gates, Musk, George Soros and others do not hesitate to weigh in on politics, and while it is easy to welcome words we agree with, we should resist this temptation. It makes sense to tap the knowledge and wisdom of those with expertise on a given topic, but counterproductive to amplify the status of those who already have it.

Another way: Of course, it is not entirely the fault of billionaires that US policy is causing inequality (though they certainly lobby for policies that have this effect). 

They should, however, bear responsibility if they misuse their status. That is especially true when they leverage their status to advance their own economic interest at the expense of others’, or to polarize society.

If unaccountable billionaires already wield too much undue influence, the last thing we should want is to give them even bigger public forums (like Musk’s X). Instead, we should pursue stronger institutional means of limiting the power and influence of the privileged, as well as reconsider the policies that created such massive disparities.

But the most important step will be the most difficult. We need a serious conversation on what we should value and how we can recognize and reward the contributions of those who do not have vast fortunes. 

While most would agree that there are many ways to contribute and that excelling in one’s chosen vocation ought to be a source of individual satisfaction and the esteem of others, we are at risk of forgetting this principle. That’s also a symptom of the problem. ©2024/project syndicate