The world’s second-richest man, Bill Gates, must have a cartoon angel on his left shoulder, like those 1930s cherubs advising Donald Duck or Pluto, who every so often makes him blurt out arguments about the limits of the free market. This week, it’s the COVID-19 coronavirus that has attracted the attention of his social-democratic better angel.
A few years ago, the topic was the clean transition, and how, in the energy sector, there are areas of research that offer profound public good but insufficient financial return. Echoing the arguments about the state as a primary catalyst for innovation of left-wing economist Mariana Mazzucato, Gates said that government should step up and ratchet not just spending in this field, but also the taxation necessary to do so.
This past week, the shoulder angel seems to be in charge once again, this time with respect to an essay by Gates on the multiple market failures relating to COVID-19, and pandemics more broadly, that appeared in the New England Journal of Medicine.
The current action being taken to solve the immediate COVID-19 crisis will include a roughly $100-million-dollar spend by the Gates Foundation focused on lower- and middle-income countries with limited health infrastructure, which he notes can rapidly be swamped by such pathogens. Beyond this, Gates says there needs to be a “larger systemic change” that requires governments to step up with tens of billions in additional, globally coordinated funding in order to meet the longer-term challenge of improving our ability to respond to future “once-in-a-century pandemics.” It has to be driven by the public sector because, as he rightly says, “pandemic products are extraordinarily high-risk investments.” There is insufficient return on those investments.
The public-sector shopping list he has drawn up is lengthy. He wants new health clinics, with trained frontline workers, not just to deliver vaccines once they have been produced, but to act as a crucial disease monitoring and early warning system for potential outbreaks. He also wants more investment in formal disease surveillance, including a case database that is instantly accessible to relevant groups with global rules that enforce national compliance with such information sharing.
While research, development, manufacture, and distribution of vaccines and antivirals are insufficiently profitable, a new global system, including the expensive, labor-intensive, and time-consuming process of discovery and clinical trials, is needed that can develop them regardless. And it must be, Gates stresses, capable of delivering billions of doses within a few months of the discovery of a new pathogen.
To do this, there needs to be the establishment of manufacturing facilities that can pump out just such a vaccine supply in a matter of weeks — simply, as he puts it, as “a global public good.”
In the good times, these factories can produce vaccines for routine immunization programs, and in the bad, pandemic times, they would be rapidly refitted for emergency manufacture. And therapeutics cannot be sold to the highest bidder, Gates insists, not just because it is the right thing to do, but because spreading pathogens do not care who does and does not have good health insurance. Limiting provision to those who can pay endangers us all, rich and poor.
While Gates himself leaves the following part unsaid, the logical implication of all this is that these billions of doses must be manufactured and distributed by a vast new global anti-pandemic service, without any expectation of profit and in service of all humans, regardless of nationality.
What he does not shy away from is acknowledging just how much this will cost. Just for coronavirus vaccines, he says, “Budgets for these efforts need to be expanded several times over. Billions more dollars are needed to complete phase three trials and secure regulatory approval.” Yet more funding will be required for disease surveillance and response.
All this is correct. And yet we have to ask Gates where all these billions, likely tens or hundreds of billions, are going to come from, if not from taxes on people like him.
Thinking With His Wallet
Last November, Gates’s shoulder devil and angel must both have been whispering in his ear at the same time during the New York Times DealBook conference, when he discussed a new wealth tax proposed by Elizabeth Warren. On the one hand, unlike many of his fellow billionaires, he said that is proud to have been the individual who has paid the most taxes (presumably of all time), a collective $10 billion over the years, and would even be “fine” if that had been $20 billion.
“But, you know, when you say I should pay $100 billion, O.K., then I’m starting to do a little math about what I have left over,” he added. “You really want the incentive system to be there and you can go a long ways without threatening that.”
The Gates shoulder devil showed up once again in a puff of sulphur, trident poking while appearing on the Late Show with Stephen Colbert with his wife and co-philanthropist Melinda, where the pair of them pooh-poohed the idea of increasing taxation to levels seen in parts of Europe as an inhibitor of growth and innovation.
When Bill said that he believes “the tax system should tax a much higher portion from people with great wealth,” Stephen Colbert countered by asking whether it should be as high as 70 percent, as the upper income tax rate was briefly under former social-democratic French president François Hollande before being revoked by Emmanuel Macron. Bill correctly noted that Hollande’s 70 percent income tax did not touch the real source of the ultra-wealthy’s wealth, which did not come from income, and so a better target would be capital gains and estate taxes.
This may at first appear as the angel on his shoulder, but he continued by saying that if such taxes are too extensive, as in the charge from Bernie Sanders that there simply should not be any billionaires, “this might have more negatives than positives.”
Colbert then noted that there are a number of countries that do have such higher taxes. When he asked how that works out, Melinda responded: “Not actually that well. There are many times, for example, in France, where they say, ‘Gosh, I wish we could have a Bill Gates. I wish we could have such a vibrant tech sector.’ But the taxes have been done there in such a way that doesn’t stimulate good growth.”
It’s a strange argument, given that her husband has repeatedly conceded that the private sector doesn’t do innovation very well, in sectors from clean energy to medicine, if such innovation is unlikely to turn a profit. Surely innovation, and indeed humanity, is best served through development of the set of all the things that are useful, not development of the much smaller set of all the things that are profitable.
Death and Taxes
We actually have quite a few super-wealthy figures calling for higher taxes. Bill Gates said that he has been the “biggest lobbyist” for higher taxes. But he is not the only one. Liberal-leaning billionaires such as George Soros and Pierre Omidyar support higher taxes; Warren Buffett, the third-richest man in the world, has likewise said, “Please, raise my taxes,” and even Michael Bloomberg has called for a more progressive tax system.
But we can now see from Gates’s interventions the extremely limited bounds of just what these billionaires mean by higher taxes: a smidge more, but nothing anywhere near so egregious as European levels.
Yet the sort of public health infrastructure that can provide for all regardless of ability to pay — which Gates rightly demands for anti-pathogen reasons — is, according to public health and epidemiological researchers, best expressed by European-style health systems that are primarily funded through, yes, higher taxes. And many European socialists, social democrats, and even liberals would actually argue that their tax rates are too low, undercutting the provision of social services, infrastructure, basic science research, and innovation.
European nations struggle already to deliver on their modest promises made at the UN climate talks in Paris in 2015, of a rich-nation $100 billion in public finance to subsidize the clean transition in developing countries. They regularly fail to meet their targets for official development assistance (ODA) agreed under the UN Sustainable Development Goals framework. Providing the sort of funds assessed by development scholars as necessary both for climate finance and for ODA would require a substantial hike in taxes on the wealthy and corporations. And now Bill Gates wants to add to that list the tens of billions at a minimum for a global anti-pandemic service, yet without adopting European levels of taxation (which, as we have seen, are actually insufficient to deliver on existing pledges)?
Even if we taxed Gates at 99 percent, he’d still have a billion dollars left over.
Gates’s social-democratic Donald-Duck-like little angel on his left shoulder is correct: the world does need a generously funded global anti-pandemic service set free from the bounds of profit. To achieve it, he will have to ignore the seductions of the devil on his right shoulder, or, for that matter, the temptations of unneeded riches of that other famous Disney character: Scrooge McDuck.