How the super-rich influence politics

There are just under 600 billionaires in Europe. We looked at how over 130 members of the super-rich turn their financial wealth into political influence. A story about prohibited wealth reporting, media moguls, and businessmen turned politicians.

Julius E. O. Fintelmann and Philippe Kramer

Imagine this: you’re on your superyacht, reading about a new tax proposal in the Financial Times, which would increase your tax rate by less than one percent. You, someone from the super-rich, cannot let this happen. What options do you have? Here are a few things you can do: You can acquire a major national newspaper and influence its editorial stance. You can also finance and set up a research centre, market it as independent, and let it run “scientific” studies confirming your position. And since rules are made by those who show up, you could also finance a group of lobbyists in your country’s parliament who constantly talk to parliamentarians. Or you could resort back to old-fashioned advertising; for example, by flooding all the physical mailboxes of the country with flyers or plastering the country with posters for weeks.

All of the above-mentioned actions have been taken more than once in the past. French media mogul and billionaire Vincent Bolloré acquired a renowned weekly newspaper and installed a far-right journalist as its editor-in-chief, leading to week-long strikes by the newspaper’s staff in the summer of 2023. In Germany, a “climate institute” has been producing reports denying the human effect on the climate crisis, presumably financed by oil and gas companies from the United States. And Europe’s richest man, luxury magnate Bernard Arnault, has reportedly withdrawn advertisements of his companies from newspapers after critical reporting, next to being best man to France’s former President, Nicolas Sarkozy.

Money brings power

Billionaires are able to change national and international politics – and often do so, too. Being in possession of enormous sums of money, these individuals are of high interest to party leaders and other political players, who often receive donations from them. But influence need not be wielded willingly or even knowingly: legislation is, for example, often made in a way to keep billionaires inside a country. In practice, this means that legislators may anticipate billionaires' moods and accommodate them before the billionaires would even think of verbalising their wishes. Political parties and wealthy individuals alike are not interested in making this indirect way of lobbying transparent to the public.

Although the decisions the super-wealthy make can change a country’s economic, social, and cultural situation entirely, for better or worse, we barely know anything about their political affiliations or ambitions or the influence billionaires have on national and international politics.

In fact, we know so little about their wealth that even academia, for the most part, relies on billionaire rankings done by Forbes or Bloomberg (rankings this investigation relies on, too). Some countries outright ban the publication of information on wealth, such as Luxembourg, where wealth rankings are not even published. The small country has one of the toughest anti-transparency laws in the world: although more than 46,000 millionaires and an estimated 17 billionaires (in 2014, the latest available data) live in the country, even the government does not know how much its residents own, with individuals not required to declare their assets. As of now, there is no EU legislation on wealth transparency, either.

This lack of transparency leads to repeated cases of financial fraud and tax evasion, such as those exposed in the Panama Papers, Paradise Papers, and Pandora Papers. Without transparency, we also cannot discuss the biggest moral question at stake: how much inequality can we accept as a society? How much should the top one percent be allowed to possess? To debate these burning questions, we must first know how the current concentration of wealth impacts our societies and politics.

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This investigation is our ambitious attempt to reveal the political influence the super-rich hold. We have profiled the three richest people or families in 40 European countries. Furthermore, we looked at one additional wealthy person or family who stood out to us in some way.

Gender disparity also exists at the very top

Unsurprisingly, gender disparity is also present at the very top of the economic ladder: looking at the top three richest in 40 European countries, only six are women. Furthermore, most female billionaires on our list gained their wealth through inheritance from their fathers or grandfathers. Different kinds of inequality interact, and wealth inequality is no exception.

Wealth inequality is not just visible within countries, but we see major differences regarding the levels of wealth in a European context as well. One person stands out in particular: Bernard Arnault, owner of French luxury corporation LVMH. He is by far the richest person in Europe, leading the list by over 100 billion euros to the next billionaire in our database. Also noteworthy is that three out of the four French billionaires we profiled got rich through luxury brands such as Louis Vuitton, L'Oreal, or Gucci, starkly contrasting the rest of the continent, where billionaires acquired their fortune mostly through bigger industries, such as construction companies or supermarkets.

The regional disparity in wealth between the Balkans and parts of Eastern Europe and the rest of the continent is massive. The richest person in the Balkans, the Croatian “insurance king” Dubravko Grgic, has 5 times less money than the wealthiest Dutch person and 30 times less than Bernard Arnault. Furthermore, most billionaires in Western Europe have become wealthy by building on inherited money or property from their families. In Central and Eastern Europe and in the Balkans, however, most billionaires worked their way up, often also through exploiting questionable methods in the 1990s.

Europe’s richest

Some billionaires in our database have even dabbled in politics themselves. A couple of noteworthy examples here are the first British Prime Minister, Rishi Sunak, who is wealthier than the British monarch; the long-term shadow ruler of Georgia, Bidzina Ivanishvili; the Hungarian billionaire and loyal buddy of Viktor Orbán, Mészáros Lőrinc; and the financier of the Swiss far-right Swiss People's Party (SVP), Christoph Blocher.

As far as it’s publicly known, Bidzina Ivanishvili first made his money by cheaply acquiring mining and steel infrastructure in the privatisation period after the collapse of the Soviet Union in the 1990s. He and his family have owned one of Georgia’s leading banks since the 2000s. In 2012, he became prime minister with the party he founded but resigned after just a year in office. Since then, Ivanishvili has continued to hold major influence in the Caucasian country and is criticised for steering the country’s foreign trajectory towards Russia, turning it into what many believe an autocratic state.

Mészáros Lőrinc, described as one of Orbán's most loyal oligarchs, was a fairly successful businessman until 2010 when Viktor Orbán's Fidesz party came into power. Then, he quickly became super-rich by procuring public projects due to his alignment with the Hungarian prime minister. He tried to become the mayor of his hometown, which was only possible after an intervention by Orbán himself. In 2016, Lőrinc acquired one of Hungary's largest publishers, Mediaworks, marking his collaboration with the government in further restricting independent press and media in the country.

Christoph Blocher, a Swiss billionaire who made his money as a majority shareholder of a large chemicals company in Switzerland, is famed for shifting Swiss politics to the right by financing the alpine country's biggest party, the far-right Swiss People’s Party (SVP). As a Swiss parliamentarian, he played a significant role in the successful referendum against Swiss European Economic Area membership in the 1990s. Later on, he became a member of the Swiss federal government as its justice councillor until he was ousted in 2007. Nonetheless, he held significant influence over the country until long after by financing referendum campaigns against minarets, burqas, and anything foreign. Without his wealth, the rise of the SVP would not have been possible.

Now, if you are one of the super-rich and feel the need to instigate political influence, these profiles below should serve as a guide. And for those unfortunate souls not within the continent’s richest, the investigation sheds light on what you are missing out on.

Where do we go from here

Two-thirds of Europeans want governments to do something about wealth inequality and see taxing the super-rich as an important task of their administrations. Few topics enjoy such high approval rates: in Austria, for example, 80% of the population wants higher wealth taxes for the rich.

Because the thing with the really wealthy is they probably pay less tax than you, proportionally. Legendary American investor Warren Buffett once said in an interview that he was legally obliged to pay fewer taxes than his receptionist despite being one of the world’s richest individuals. He was not wrong: most billionaires do not receive a traditional, taxable income. Instead, they keep most of their money in stocks and other financial assets, which are only taxed when they are sold at a profit. As billionaires usually only sell very few shares – enough to cover their expenses – they are taxed on these so-called capital gains rather than on a normal salary or income earned as employees.

You may ask, don’t billionaires already do a lot of philanthropy, using their money for the public good? Only very few billionaires actually give significant amounts of their wealth to philanthropic activities. In the US, 264 out of the top 400 billionaires have given away less than 5% of their wealth, according to numbers by the Forbes Philanthropy Score. While a similar ranking is missing in Europe, our investigation essentially confirms that European numbers coincide with the American ones.

However, there are a few billionaires who finance valuable work for the enhancement of democracy and human rights, such as George Soros' Open Society Foundations. However, many civil society organisations consequently depend on funding from those philanthropists, which can cause existential problems when funding gets withdrawn, as shown by Open Society Foundations' recent announcement to completely stop funding in Europe. In some countries, civil society hinges on the commitment of a few individuals or institutions, which act completely outside democratic control or decision-making.

So, philanthropy is not something to be counted on. There are many ways to lift people out of poverty and make the broader population wealthier. However, to actually reduce the extreme levels of wealth concentration at the very top, there's really only one way: taxes, taxes, taxes. What, then, is needed to tax the wealthy more?

Lawmakers need the know-how

The political influence of the wealthy is one of the reasons why the richest don’t pay more taxes. However, there is more to it: there is a lack of policy competence when it comes to financial issues, especially on the left. A recent study interviewed progressive German politicians and found that when it comes to taxation issues, both lobbying and a lack of knowledge hinder the introduction of a wealth tax. Political youngsters tend to join left-wing parties because they are primarily interested in work and social affairs, and less in financial issues – while there are waiting lists among conservative parliamentarians to join finance committees. The huge, and sometimes artificially increased, complexity is used to cement the status quo.

To effectively reduce wealth inequality, tax policy needs to become a matter close to the heart of progressive parties. Otherwise politicians seem to be left clueless and overwhelmed when confronted with resourceful anti-tax actors.

Capital gains tax

Taxing the super-rich is a tricky thing. The way the majority of their wealth is stored – in stocks – allows for quick transfers, even across country borders, making it easy to manoeuvre around newly imposed taxes. Furthermore, one does not even know the value of certain assets, such as real estate. If, say a castle, isn't being sold, one can only estimate how much said castle is worth as it's not being valued. And these estimates vary heavily.

However, in principle, economists have found two main ways to reduce the sums billionaires own: capital gains tax and wealth tax. As laid out above, very wealthy people are usually taxed proportionally less than people with normal income, as they rely on capital gains from selling shares. Some of the countries with the most millionaires and billionaires per capita, such as Luxembourg, Switzerland, and Belgium, do not levy any capital gains tax. In European countries which do levy tax on capital gains arising from the sale of listed shares, said tax averages at 19.4%. For comparison: personal income tax in Europe averaged at just over 40% from 1996 until 2021, according to the European Commission.

Wealth tax

However, the income of billionaires is only a fragment of what they own, as most money is kept in assets, such as stocks and bonds, real estate, luxury items, and cash. All of this wealth is systemically undertaxed. Out of the 12 European countries which had a wealth tax in 1990, only Norway, Spain, and Switzerland still have this tax today.

A wealth tax can also come with liquidity issues. Wealth is often is stored in stocks, whose value is constantly changing. Would people now be required to sell a share of their stocks in order to pay their taxes, this may devalue said stocks, leading to wealth loss for the individual and market disruptions in general. There are also timing issues: taxpayers might have to sell assets in a down market to meet tax obligations, leading to further wealth erosion.

Another reason why many countries saw the wealth tax abolished was because its progression hit very early, already affecting those with just a couple of millions on their bank accounts, instead of billionaires. Subsequently, many wealthy people left for countries without such a tax, reducing the overall tax income of their departure countries – for example, this happened after Norway slightly increased its wealth tax recently. There, the social-democratic government increased the wealth tax from 0,85% to 1,1%, causing major capital flight by many of the country’s billionaires. They’re taking so much money with them, that the wealth tax is projected to result in more than 500 million euros less revenue than it currently generates.

European solution

There are workarounds to this issue. To prevent billionaires from moving to other European countries, the tax needs to be the same across multiple countries, similarly to the new global minimum corporate tax rate of 15% on multinationals, introduced by the Organisation for Economic Cooperation and Development (OECD). However, places outside communities such as the OECD or the EU remain, making it very difficult to completely prevent the possibility of capital flight.

There is movement in the debate on the European level. This June, a group of economists, activists, politicians, and multimillionaires started a European citizens’ initiative, demanding that the European Commission adopt a permanent and progressive annual wealth tax. To make it work this time, a team of economists around star economist Thomas Piketty propose a high threshold which ensures that only a small group of the super-rich would be affected. Furthermore, as one does not choose parents, inherited wealth should be taxed more than income or “self-made” wealth. While European citizens’ initiatives are rarely successful and the EU’s legislative competence on taxes is limited, this could serve as an example which left-wing groups could rally behind in the runup to the European elections of 2024.

More transparency

We’ve put a lot of work into this investigation, trying to unveil how the super-rich influence national and international politics. While we found a lot, we also need to be honest: there is still much to be uncovered. We as societies have little insight into the dealings of most super-rich and how they play a role in politics. We need to understand the extent of wealth concentration – especially the impact it has on democratic processes and decision-making – to discuss what could and should be done about it.

But this needs to be a collective societal effort, led by stricter transparency requirements.In Norway and in Finland, tax returns of all citizens are published every year, without exceptions, for anyone to inspect. Media outlets can search through a website to compile lists of the country’s highest earners. Maybe something to take inspiration from?

28 September 2023: The segments about wealth tax and capital gains tax have received minor updates for clarity and accuracy.

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