Elite capture

Elite capture is a form of corruption whereby public resources are biased for the benefit of a few individuals of superior social status in detriment to the welfare of the larger population. 

• Elites are those who enjoy privileged status and exercise decisive control over society. Three-fold classification of elites are (a) knowledge elites, (b) entrepreneurial elites and (c) political elites. 
• Elites are groups of individuals with self-ratifying factors such as social class, asset ownership, religious affiliations, political power, etc have decision-making power in processes of public concern and uses public funds intended to be invested in services that benefit the larger population, to fund projects that would only benefit them. 
• Elite capture is related to information asymmetry, inefficient regulation or inefficient allocation of resources causing biased distribution of a public goods or a services, wherein certain segments of the population experience reduced access to these public goods. As long as there is elite capture, the welfare impact will not be Pareto Optimal* or equitable.*Pareto optimality is simply a statement of impossibility of improving one variable without harming other variables.
• When people have preferences about what other people do, the goal of Pareto efficiency can come into conflict with the goal of individual liberty.
• By yielding power to smaller units, money should be more efficiently distributed, but local governments are more vulnerable to pressure groups. Local governments are even more vulnerable to capture by local elites than national governments.
• Community-based development has inadequate understanding of power relationships at the local level, which leaves room for elite capture.
• An elite derives its status from its relationship to property, whether physical or human capital. While stable property rights are necessary for everyday business, unstable property rights may have a positive impact on economic development. Institutional changes have a positive impact on economic development when a country’s elite can manage them. 
• Counter-elite approach need not necessarily be effective in challenging elite domination, but the co-opt-elite approach risks legitimizing the authority of the elites and worsening poverty by implementing anti-poor policies. The success of dealing with elite capture lies in the flexible use of the counter-elite and co-opt-elite approaches together with the need to secure alternative livelihoods and to achieve empowerment with the poor.
• The role of elites in economic development have a disproportionate impact on development outcomes. While a country's endowments constitute the deep determinates of growth, the trajectory they follow is shaped by the actions of elites.
• Poverty is a problem for the rich in the sense that it generates negative externalities that they would like to reduce, and that the elite believe that there are effective remedies. While reducing poverty is a national priority, elites do not see it as their responsibility to do something about it. Elites feel that through education, poor will be able to take advantage of opportunities and resources and is a solution because everyone can supposedly get richer without the need for redistribution. Elites are failing to create a consciousness that makes them react more responsibly in supporting pro-poor policies.
• Evolution of welfare states inform us that elites’ prioritization of poverty reduction is driven by the extent to which elites and the poor are interdependent, such that the presence of the poor has a positive or negative impact on elite welfare. 

Believers in liberal freedom should worry whether they can prevail
against their own forms of institutional entropy:
elite capture, corruption, and inequality - Michael Ignatieff

Extreme wealth is indefensible

What is difficult to understand about those who make millions of dollars a year is why they ever need that kind of money for? Who could ever use that much? What are they even spending it on? Why do they actually want it?

• These people live like monarchs. They live in almost ludicrous luxurious excess.They make no effort to curb their consumption. 
• When they want something, like a piece of designer clothing or a fancy dinner, they simply buy it. An expensive meal does not require an occasion. If the family wants to go out to a pricey restaurant, they just do it.
• They don’t have to do household chores. Everything is taken care of by the housekeeper, gardener, housemaid, driver etc. It is difficult to fathom living like this.
• Yet most of their income still just gets tossed into their savings account. This is truly extraordinary. 
• Whether increased taxes on the wealthy will have useful consequences is arguable. What is unimaginable is that increased taxation would deprive these people in any serious way.
• These people donating to charities may not exceed 1% of their annual income. It’s almost as if they care far more about feeling like they are charitable than actually being charitable.
• They rarely encounter criticism for the moral aspects of this kind of life. In wealthy circles, everyone has a strong interest in allowing each other to feel like they are good people. So if one person mentions about their donating to charities, the friend is unlikely to criticize. Rarely do elites tell other elites that it is wrong to be an elite, for obvious reasons. 
• And the most contact this person has with the working class probably comes during chance encounters with the pool man, who is unlikely to voice any judgment he may secretly hold about their decadent bourgeois habits.
• Even $400,000 annually is far too much to live on. It is very difficult to even grasp the amount of money possessed by the 20 people who own more than half the country’s wealth. If it takes a lot of effort to fritter away $400,000 each year, imagine how the billionaires struggle to think of things to buy. That’s why their spending becomes outright ludicrous. Once you go past the first million, there’s not really much more pleasure you can buy, so you have to resort to nonsense.
• The tax policy implications are debatable. But it’s uncontroversial to conclude that the possession of enormous wealth, especially in a time of great suffering, is just indefensible in every way. Even $400,000 a year provides enough to live in extreme luxury. Anything over that is just obscene. 
• Risk-taking investors deserve higher returns, but actual returns do not necessarily reflect merit. The determining quality of  billionaires is to be lucky -- the other qualities being necessary but not sufficient. And luck is not meritocratic.

Inequality does not cause poverty. Capitalism has resulted in much more economic inequality in China, but much less poverty. Studies have shown that lower taxes for the wealthy don't necessarily result in increased economic growth. Extreme wealth contributing to inequality were seen as irrelevant and a prerequisite for the growth that would also help the poorest, as the wealth created trickled down to the benefit of everyone. But rather than creating jobs and lifting others out of poverty super-rich minorities cause social unrest and depress demand for goods and services, limiting growth and innovation as a result. Extreme wealth causes extreme inequality that impedes poverty alleviation, slows economic growth, compounds gender inequality, drives inequality in health and education outcomes, undermines economic mobility over generations, fuels crime, undermines social cohesion, and harms democracy.

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That man is rich, whose pleasures are the cheapest ... Henry David Thoreau
Honesty is incompatible with amassing a large fortune ... Mahatma Gandhi 

At least 50% of the world’s billionaire wealth is non-meritocratic owing to either inheritance or a high presumption of cronyism. Another 15% is not meritocratic owing to presumption of monopoly. All of it is non-meritocratic owing to globalization. By contrast, crime and technology are found to be negligible sources of extreme wealth. The argument that "These eight billionaires, through the salaries and stock paid to their employees and the stock owned by millions of shareholders, have made millions of people rich and improved the lives of billions of people through the use of their products. They have not made anybody poor." is fine but governments must tax them at higher tax rates and spend the proceeds for accelerating eradication of poverty. These billionaires have a greater obligation for contributing for this cause.