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CARDIFF GARCIA, HOST:
Hey, everyone. This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia. And today is our next installment of Finance Fridays with Mary, when my friend Mary Childs, the Barron's finance reporter, tells us all about banking, Wall Street, hedge funds, the world of investing - you name it. Mary, welcome back.
MARY CHILDS: Thanks for having me.
GARCIA: So Mary, you brought us this story about a trend that you noticed was really picking up in the last couple of years.
CHILDS: That's right. As part of my job, I end up interviewing a lot of financiers, including some who happen to be billionaires. And I...
GARCIA: Like you, right?
CHILDS: Quite, yes. I started noticing that a lot more of them are talking about income inequality and wealth inequality now more than they used to, right? And I thought that was kind of curious because these are really the people that have won, right?
GARCIA: From inequality.
CHILDS: They're the biggest beneficiaries of inequality. So I started looking into why.
GARCIA: OK. We are going to hear more about this trend of billionaires discussing inequality and how that affects the rest of us, which happens to be the most of us, right after the break.
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GARCIA: OK, everybody, we've got Mary Childs in the studio. Mary, this trend of billionaire financiers increasingly talking about inequality is a trend that you've noticed from the last year or two. But I actually want to start with the way that billionaire financiers used to talk about inequality.
CHILDS: So they kind of didn't.
CHILDS: They would often say what really matters is that people with, you know, lower incomes or middle-class incomes have opportunities to rise up, to lift themselves up. Inequality was sort of an unfortunate byproduct of not having access to the system or capitalizing on that access. And so they often would say things like, look - here's what I did. You, too, can do it.
GARCIA: OK, and what about economic growth? Didn't they usually emphasize that instead of policy ideas that would reduce inequality directly?
CHILDS: Their big fear about the policies that reduce inequality or are aimed at reducing it is that they would actually impede economic growth, which truly is the way, in their opinion, to change people's outcomes, to change destinies and allow people to become rich and very successful.
GARCIA: So they have a different philosophical approach to dealing with inequality. OK, so that's how they used to discuss inequality. What about the last year or two? What has happened? What have you noticed?
CHILDS: So I went to a conference in May in LA, and it was this collection of the biggest names in finance and hedge funds, private equity. You've got Steve Schwarzman, who's, you know, Blackstone; Robert Smith, Vista Equity - all these people that are very important in the world that I cover.
GARCIA: Yeah, the Milken Conference, named after the billionaire financier himself, Michael Milken, sure.
CHILDS: The one and only. Yeah. And people were on stage, and there was this unmistakable tone at the conference - which, I tell you, I have never heard before - of people talking about this urgency, that we need to fix this problem of inequality, and we need to do it now. And what they were saying was - they cited all these stats on the panels. They talked about the differences - you know, different outcomes for people, the lack of access, the lack of wealth, the lack of kind of access to capital markets was a big one - that people didn't have the ability to make money on any money that they had. These are things that they think about as emergencies.
Ray Dalio the founder of Bridgewater - which is one of the world's biggest hedge funds, most successful hedge funds - he's a billionaire, and he is extremely concerned about this. And he's calling it - he's saying that if he were president, he would declare it a national emergency.
GARCIA: All right, let's listen to a quick tape of what Ray Dalio said earlier this year.
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RAY DALIO: We can call it a wealth gap; you can call it an income gap. What I would do is recognize that this is a national emergency. It's a huge issue.
GARCIA: I also want to note, by the way, that even though economists and other people can have reasonable disagreements and debates about just how much inequality matters, they do largely agree that both income inequality and especially wealth inequality have gone up in recent decades. So right now - this is according to the St. Louis Fed - the richest 10% of households in the U.S. own more than three-quarters of all the wealth, and the bottom 50% - so that is half of American families - they own just 1% of the wealth. Mary, is it these trends that are driving this change in attitude amongst these billionaire financiers?
CHILDS: Yes, but it's not just these trends. There's also been a huge shift in public discourse, and they're responding to that. I think that's been the more immediate catalyst. They've seen that there's been this change in tone politically. For example, there are members of Congress that are from the Democratic Socialist Party, and they're pushing for policies that these billionaires see as quite radical and, frankly, dangerous. So these billionaires want to kind of offer their own solutions that they think would reduce inequality but not fundamentally threaten the capitalist system that they think works pretty great overall.
GARCIA: Yeah. So in other words, inequality has also been a bigger part of the national conversation in the last decade and in the last few years.
CHILDS: It absolutely is. And I think the billionaires themselves have seen and benefited from this rise in asset prices. And they - I mean, they feel that.
GARCIA: Asset prices like stocks going up, houses going up.
CHILDS: They own stocks. They own real estate. They own art. And the art that they're owning, every year there's this, like, ridiculous spate of, like, oh, everything reached a new record. That's bananas. Everything shouldn't reach a new record every minute. They feel that. They see that. They know that other people don't own a Modigliani. They know that there's sort of - they can kind of look in their rearview mirror and see that everyone else is not benefiting. And while that may be, like, oh, good, I did a good thing. Like, yay, I bought a smart art. They also...
GARCIA: A smart art.
CHILDS: ...Externally, I think, did a good job.
GARCIA: Trademark that, please.
CHILDS: There's, externally, this new feeling that something's going to change, and they probably want to be ahead of that.
GARCIA: OK, so they've noticed that it's becoming a bigger part of the conversation. They're participating now in that conversation. What do they actually want to do about inequality, right? So rather than just talking about it, do they actively favor any policies that would actually address inequality?
CHILDS: They have not organized on this.
GARCIA: (Laughter) OK.
CHILDS: I know you're surprised (laughter). But there is some sort of disparate opinion on what should be done. So Robert Smith, the private equity founder, you might recognize his name because he recently forgave all of the student debt of an entire graduating class at Morehouse College, which was incredible and his own way of chipping away at this larger issue. He does a lot of other things as well. He also does a lot of work trying to offer internships in underserved communities in these kind of on-ramps, as he calls them.
Ray Dalio and others have suggested kind of convening a bipartisan group of very smart and-or skilled people to talk about these issues and brainstorm. I hate to tell them that that's the government. We did that. We tried.
GARCIA: (Laughter) But it sounds like, from these examples, a lot of these billionaires are still recommending ideas that would come from, like, individual initiative rather than from a government solution.
CHILDS: Yeah. There are some that say that higher taxes - they should be paying higher taxes, absolutely. Some people think that, and some people are putting that forward, but it's not the popular opinion among billionaires. There is an appreciation that perhaps there are some levers that we should pull. Dalio also suggests a lot of public-private partnerships to do stuff.
GARCIA: It seems like there are a couple of different possible interpretations of this trend, right? One is that these billionaires are trying to catch up to the public conversation and show that they also care, possibly as a way of stopping some of the more, as they see, radical policies that would come after their own wealth, right? The more generous, the more charitable interpretation, though, is that they've been made aware of something that really matters, of a trend that really matters, that they may not have recognized was as important to people as it really is, and so now that they've seen that, they want to talk about it.
CHILDS: I actually think that that's true. I don't think you're being overly generous. I think there is an exposure question, where - if you're a billionaire, you hang out with other billionaires. You're talking about, like, what jet's better; you're not exposed to people that are struggling and having a hard time as much as, you know, everyday people might be.
So I went to a dinner with a billionaire the other day, and he was like, Mary, how serious is this socialism thing? How seriously should I take it? And I was kind of taken aback because, like, I'm not really - I mean, I journalism, but I'm not a huge expert on this. And I was like, oh, I think you should pay attention. I think it is a - I think it's real.
GARCIA: (Laughter) Yeah. Right.
CHILDS: So that was actually telling to me because there is this anxiety, and I just think it did lag the culture a bit because they don't necessarily - they're not in the mix.
GARCIA: OK. Mary Childs, thank you so much.
CHILDS: Thank you.
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GARCIA: This episode of THE INDICATOR was produced by Rachel Cohn, fact-checked by Emily Lang and edited by Paddy Hirsch. THE INDICATOR is a production of NPR.
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