Don’t Soak the Rich: Weak Institutions—Not Private Fortunes—Deform Democracy
Foreign Affairs · Daniel Waldenstrom ·
Weak institutions—not private fortunes—deform democracy.
As private wealth continues to grow to levels never before seen in modern history, a powerful idea is taking hold in the West: the accumulation of great fortunes poses an existential threat to democracy. This idea is not novel. Over a decade ago, the political scientists Jacob Hacker and Paul Pierson asserted that the rise of plutocracy has been a defining trend of American politics since the late 1970s. The economist Paul Krugman argued in 2011 that the “extreme concentration of income is incompatible with real democracy.”
Lately, however, it has begun to gain traction in the halls of power of Western democracies. In his farewell address, former U.S. President Joe Biden argued that an “oligarchy of extreme wealth, power, and influence” was threatening “our entire democracy, our basic rights and freedoms.” Spanish Prime Minister Pedro Sánchez echoed the sentiment at a 2025 G-20 summit, warning that concentrated wealth “corrodes democratic institutions.”
Some now see confiscation as the answer. After a bitter debate and over $300 million of cumulative spending by supporters and opponents, Californians rejected a statewide “billionaires’ tax” ballot measure in this week’s midterm elections. But the proposal counted among its proponents six Nobel laureates in economics, including Daron Acemoglu, Peter Diamond, and Joseph Stiglitz, who endorsed the tax in a letter framing it as “a turning point in the battle between democracy and oligarchy.” The French economist Gabriel Zucman called the measure’s defeat “just the beginning” and vowed that though “Silicon Valley billionaires have won this battle … they will lose this war.” Several European political leaders, including the former German Green Party leader Annalena Baerbock and Danish Prime Minister Mette Frederiksen, have floated wealth tax proposals of their own in recent years.
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