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Man who predicted GFC demands wealth cap

Richard Hames says we need an individual wealth cap to combat new wave of capitalism. Source: Getty

Capitalism, which is a system where private owners control the country’s trade, has come to a crisis point in western countries, particularly America, where billionaires continue to earn billions and poorer citizens remain poor.

In Australia, the richest 10 per cent of the nation hold nearly half of the country’s entire net wealth, according to Roy Morgan’s latest report.

This group holds 47.3 per cent of Australia’s net wealth, while the poorest 50 per cent hold just 3.6 per cent.

“The question we are looking at at the moment is: how long can current forms of capitalism last?” Richard Hames, who predicted the GFC and 9/11, told Yahoo Finance.

Capitalism is morphing away from its roots of laissez faire, which is an approach where economies and businesses function best where there is no interference from the government, to a “more predatory form of capitalism,” which Hames dubbed “surveillance capitalism”.

No longer is their tension around capital versus labor – the tension is between “the observers and the observed,” and, more specifically, the control of our data.

“We think, and this has come out of recent research, that there are two things that are the current platforms of capitalism as we understand it: the first is growth...and the second is the proposition that at some stage within the next decade, governments will need to consider how to put a cap on individual wealth.”

And while Alan Joyce’s $24 million salary might have tongues wagging in Australia, the situation is far worse in the United States, Hames said.

“It’s totally inequitable and unsustainable.”

“I work a lot with incumbent leaders all around the world, CEOs, board directors… And they all know that they as individuals are not worth that amount of money. It’s a team effort.”

US Senator fights current capitalism in the US

Former Harvard professor and senator for Massachusetts, Elizabeth Warren, is gunning to redefine capitalism in the US.

“Right now, this government under Donald Trump, and under the Republicans for a long time now, has been about making government more for the richest and most powerful in the country,” Warren told CNBC.

“We believe there’s value in each of us, and that government can be a real force for good on health care, on helping our kids get an education, on building the infrastructure we need to build, on fighting back this horrible opioid crisis, on investing in medical research. These are the things we can do together.”

But billionaires are fighting back

In a recent tweet, Senator Warren told billionaire Leon Cooperman that he was able to succeed because of the opportunities America gave him.

“Now why don’t you pitch in a bit more so everyone else has a chance at the American dream, too?” Warren said.

Cooperman bit back at Warren, stating she sounded like “a parent chiding an ungrateful child”.

“However much it resonates with your base, your vilification of the rich is misguided,” he said.

“For you to suggest that capitalism is a dirty word and that these people, as a group, are ingrates who didn’t earn their riches … and now don’t pull their weight societally indicates that you either are grossly uninformed or are knowingly warping the facts.”

But other billionaires like Warren Buffet and Bill Gates have called for the rich to pay higher taxes to fight income inequality.

“The wealthy are definitely undertaxed relative to the general population,” Buffet told CNBC.

Gates told CNN he needed to pay higher taxes too.

“I’ve paid more taxes, over $10 billion, than anyone else, but the government should require people in my position to pay significantly higher taxes,” Gates said.

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