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Business Commentary Billionaires take a page from the progressive playbook (to a point)

Pop quiz: Who said this past week that “capitalism is not working well” and warned of a “high risk of bad conflict” among haves and have-nots?

Nope, it wasn’t Chinese President Xi Jinping or NDP leader Jagmeet Singh or Alexandria Ocasio-Cortez, the emerging star of the U.S left. It was Ray Dalio, founder of Bridgewater Associates LP, the world’s largest hedge fund. He wrote a 7,000-word article on LinkedIn outlining his problems with the capitalistic system.

For extra marks: Who pointed a few days ago to growing income inequality and stagnant middle-class incomes and warned “the American dream is alive – but fraying for many”?

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In this case, it was Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co., the biggest bank in the United States.

Call these gentlemen the billionaire Bolsheviks. While both Mr. Dalio and Mr. Dimon say they remain staunch believers in capitalism, they have suddenly started spouting phrases that sound as if they were ripped from a progressive manifesto. Instead of talking about the stock market, they are fretting about people left behind by the economy and mulling plans for better health care and better schools.

Count on this trend to continue. In part, the recent outburst of altruism reflects genuine concern on the part of the ultra-wealthy. (Mr. Dalio, for instance, has promised to invest US$100-million in schools and other projects in his home state of Connecticut, provided the state and other wealthy individuals match his donation.) But, in all likelihood, the display of conspicuous caring also stems from growing fear of what alternative remedies might look like.

Voters in many countries are kicking back against systems concocted by the elite. Britain’s attempted rejection of the European Union, the yellow vest movement in France and the election of Donald Trump in the United States demonstrate some forms popular discontent can take. These manifestations of middle-class anxiety aren’t always coherent – witness the shambles that Brexit has become - but they are heartfelt.

The next presidential election cycle in the United States is likely to ratchet up the passion for reform. Democratic Party candidates such as Elizabeth Warren and Bernie Sanders are promoting plans for a genuine overhaul of the economy. Mr. Sanders, for instance, wants to break up big banks like JPMorgan and tax the estates of billionaires at rates up to 77 per cent. He would also guarantee medical care for all and make college free for qualified students.

Warren Buffett, who knows a thing or two about power, is among the billionaires who have been paying attention to the shifting political currents. He owns a large stake in the beleaguered lender Wells Fargo, which has been fighting the fallout from revelations that bank employees opened millions of fake accounts for customers without their consent in order to meet sales goals.

Mr. Buffett told the Financial Times last weekend that Wells Fargo’s new leader “shouldn’t come from Wall Street” because any executive from the financial establishment would automatically “draw the ire of a significant percentage of the Senate and the U.S. House of Representatives, and that’s just not smart.”

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Mr. Dimon is likely to get a taste of that populist anger when he appears alongside several other bankers on Wednesday before a Congressional committee. The committee is investigating how to hold megabanks accountable, both in terms of consumer protection and financial stability. But not just banks are under the microscope.

Harvard professor Ken Rogoff - a former chief economist at the International Monetary Fund and pretty much the embodiment of mainstream centre-right economic thinking - recently wrote an enthusiastic column about Ms. Warren’s plans to rein in big technology companies and tackle the growing concentration of power in U.S. industry.

“Big Tech is only the poster child for a significant increase in monopoly and oligopoly power across a broad swath of the American economy,” Prof. Rogoff wrote. “Although the best approach is still far from clear, I could not agree more that something needs to be done.”

The crucial question is how sweeping that “something” might be. For all the concerns voiced by Mr. Dalio and Mr. Dimon about growing inequality, decreasing health and poor educational outcomes, their suggested fixes come across as tame stuff – more bipartisanship, new spending on roads and bridges, more preschools, easier access to apprenticeships, and so on. These worthy but less than inspiring ideas seem unlikely to satisfy the appetite for change.

“It doesn’t take a genius to know that when a system is producing outcomes that are so inconsistent with its goals, it needs to be reformed,” Mr. Dalio writes. But it’s not yet clear which type of reformer will win – the billionaire Bolsheviks or the genuine variety.

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