Misgivings are growing about the ever widening gap separating the bulk of us from people accumulating extreme wealth. A recent auction in New York painted a graphic picture of that gap. Salvator Mundi, a painting by 16th century Italian artist Leonardo da Vinci, sold for US$400 million. The final cost to the buyer, including transaction fees and levies, was US$450 million. In Canadian currency that is $576 million!
We do not know the buyer’s identity, but we know who sold it. It was a 50-year old Russian cardiologist. The man graduated from medical school at the time the Soviet Union collapsed. As Russia ditched communism to embrace capitalism, our cardiologist figured out that he could make a lot more money wheeling and dealing in tax havens than he could as a cardiologist anywhere in the world.
In little over 20 years our cardiologist accumulated $9 billion: that is nine thousand million dollars! Working a 40-hour week with two weeks holidays for 20 years one would have to earn $650 per hour to accumulate that fortune! But our cardiologist made a lot more money. $9 billion is the fortune he accumulated in addition to spending what must be a pretty penny on a lavish lifestyle. With opportunities for instant riches offered by tax havens, who in their right mind would waste years studying to become a cardiologist?
Money of that kind is not earned, it is made, and here is how it is done. A Swiss art dealer bought Salvator Mundi for $100 million in 2013, and sold it that same year to our Russian cardiologist for $163 million, making a $63 million profit. Our Russian cardiologist has now sold it for a profit of $350 million. That is how money is made.
How much is $350 million? It is $80 million shy of the projected cost of a new Mills Memorial Hospital. Salvator Mundi’s buyer paid $150 million more for one painting than it would have cost him to build a new, fully equipped hospital in Terrace! (Instead of purchasing Salvator Mundi he could have built a new hospital in Terrace and paid for it out of pocket). He would still have $150 million left over to buy an impressive collection of paintings to adorn his family room and weekend retreat.
The collapse of the Soviet Union left capitalism as the winner in the battle of economic ideologies. Victory emboldened powerful elites everywhere, Canada included. They charmed the political leaders we elect into relaxing and reducing government surveillance of economic activities. We all cheered and voted for deregulation and for the tax cuts that brought us to where we are today.
Karl Marx – yes, that Karl Marx – warned 120 years ago that: “[The bourgeoisie] has agglomerated population, centralized means of production, and has concentrated property in a few hands.” Marx sensed that extreme concentration of wealth would ultimately destroy society. He anticipated that the egregious economic inequity he witnessed all around him provided fertile soil where outrageous and irrational politics would inevitably thrive. The ideology he expounded did not work out as he had expected, but his assessment of the dangers arising from gross economic inequity was correct.
The Panama Papers leaked last year revealed the names of 625 Canadians, and the recent Paradise Papers revealed another 3,000 Canadians, including two former prime ministers, with connections to offshore tax havens. Tax havens are efficient vacuum cleaners that amass fortunes by sucking the wealth ordinary people generate for their communities, diverting it instead to enrich the greedy few.
Extremism is once again on the rise globally. We could wait for populist agitators to embroil society in radical ideologies. Or we could tell the politicians we elect that community needs cannot be met by enabling personal wealth accumulation in the billions of dollars.