Shared prosperity? Billionaires under fire confront wealth gap at Milken Conference

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Published: May 2, 2019 8:08:22 AM

The wealth on display this week at the annual Davos-style conference organized by Michael Milken, once of junk-bond fame, is capturing a moment in our age of growing inequality.

In addition to the gap between the rich and poor, gender equity in the workplace was a theme of this year’s conference. (Reuters Photo)

In Beverly Hills, the chicken Caesar salad costs $25.95.

Stephen Schwarzman, with a net worth of $14.3 billion, could buy one for all 329 million people in the U.S. today — and then do so again tomorrow for 222 million of them.

The wealth on display this week at the annual Davos-style conference organized 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.

That chicken Caesar at the Beverly Hilton? The price breaks down to almost four hours of work at the federal minimum wage.

It’s 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’s 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 health care, affordable housing and university degrees free of crushing debt.

‘Shared Prosperity’

The conference reflects Michael Milken’s relentless ambition to become the ultimate problem-solving capitalist. Panelists and attendees include bankers, investment managers, politicians, entrepreneurs, entertainers and athletes. The theme of this year’s gathering, where tickets start at $15,000: “Driving Shared Prosperity.”

The concern, as attendees sipped craft whiskeys, dined on poke and crab cakes, and took selfies with “Shark Tank” star Kevin O’Leary: 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,” Alan Schwartz, a managing partner at investment firm Guggenheim Partners, said on a conference panel Tuesday. His colleague Scott Minerd, the firm’s chief investment officer, said in an interview that “the disparity in wealth is so extreme, it’s feeding populism.”

Wealth Concentration

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 $100 billion — Schwarzman, of Blackstone Group LP, and Apollo Global Management LLC’s Leon Black among them. 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,” Ken Griffin, the billionaire founder of investment firm Citadel, said Tuesday in an interview with Bloomberg Television from the conference.

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-square-foot Manhattan penthouse for a record $238 million, making it the priciest U.S. home. The planned levy was eventually replaced by a one-time mansion tax that’s considered a less-onerous alternative.

American Dream

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.

Speaking at the conference Wednesday afternoon, the Bridgewater Associates founder said 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 said. “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.”

Griffin, during an on-stage interview with Milken earlier Tuesday, said it’s education, not the capitalist system, that’s broken in America.

He also pointed to the economic and humanitarian crisis in Venezuela, where the opposition leader has called for a military uprising in an effort to unseat socialist President Nicolas Maduro, and said younger people in the U.S. don’t appreciate the downsides of socialism like previous generations did.

The audience then applauded after Milken played a video of Margaret Thatcher lauding capitalism.

Ivanka Appearance

Some attendees discussed plans for helping the underprivileged. Speaking on a lunchtime panel Monday, Ivanka Trump, daughter of and adviser to billionaire President Donald Trump, touted an education-reform plan that included increased federal spending on vocational training.

“This tight labor market is creating a great moment for us” to make changes, she said, citing job vacancies that exceed the number of unemployed workers in the U.S.

In addition to the gap between the rich and poor, gender equity in the workplace was a theme of this year’s conference. Citigroup Inc. co-sponsored an Equality Lounge at the conference, where cushions read “Add Women to Every Equation” and a set of scales were left imbalanced with rose-colored jellybeans to reflect pay inequality.

Even with all the lip service paid to correcting societal ills, much of the conference was aimed at the very privileged. On panels, executives pitched services such as selfie-friendly helicopter rides. One touted the benefits of micro-dosing LSD. And, on Monday morning, a handful of attendees meditated to the sound of chiming bells, while others networked nearby over a spread of bagels and coffee. By Wednesday, attendees were snacking on make-your-own avocado toast.

For some attendees, capitalism itself — along with the taxes wealthy people already pay, and the social programs they fund — are the answers for combating America’s problems.

“I’ve seen the American dream work out,” said Griffin, who started his trading career from his Harvard dorm room and told Michael Milken that he now has in his office a poster of Milken’s deals. “What we should really focus on is economic freedom.’’

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