Trickle-down economics is a myth. Instead of fostering prosperity, extreme wealth accumulation fuels inequality, destabilises economies, and undermines democracy. In 2024, the wealth of Europe’s 440 billionaires grew by nearly €400 million each day, with a new billionaire emerging almost weekly. This contrasts with the widespread concern of Europeans struggling to meet the cost of living. But this is a global issue: while the world may soon have five trillionaires, global poverty rates remain stagnant.
The recent turmoil in U.S. politics offers a warning of what can happen when extreme wealth goes unchecked. From the unelected Elon Musk being handed a seat in President Trump’s cabinet to the pervasive influence of billionaires and corporations over both major political parties and even the judiciary – the corrosive effects of extreme wealth on democracy are undeniable. Across Europe, the concentration of wealth and power in the hands of a few people distorts policymaking, resulting in worse economic outcomes, deepening inequalities, and eroding trust in institutions.
If Europe is to avoid further undermining democracy and fuelling social, economic and political stability in the continent, our politicians must take decisive action to address extreme wealth. The European Commission’s commitment to studying wealth taxation is a step in the right direction, but it must be backed up by concrete policies, including greater wealth taxation and exploring an extreme wealth line as a tool for democratic engagement and wider policy reform.
Extreme wealth undermines democracy
The unprecedented accumulation of wealth among a select few individuals has far-reaching implications for democratic processes. Billionaires such as Elon Musk, Jeff Bezos, and Bernard Arnault exemplify how extreme wealth can influence labour rights, tax policies, media narratives, and political landscapes – all to the detriment of broader societal interests.
Alongside his formal role in the US government under President Trump, Musk, the world’s richest man, recently used his social media platform X to spread misinformation, particularly in the lead-up to the German elections. German, French and EU authorities are now seeking access to X’s algorithms to investigate the extent to which Musk has been manipulating them.
Amazon, the company founded by Bezos – the world’s second-richest man –, has faced scrutiny in Europe for anti-union practices, tax avoidance, and market dominance. In Germany, for example, Amazon workers have staged multiple strikes to demand fair wages and conditions. Bezos’s business empire also includes The Washington Post, where he has used his power to shape media narratives.
France’s Arnault, Europe’s richest man and CEO of LVMH, has been criticised for leveraging his wealth to try and shape policy and evade taxes. Meanwhile in Hungary, Prime Minister Viktor Orbán’s government enables oligarchs close to the ruling party to amass wealth through state contracts, eroding democratic institutions and entrenching economic disparities.
As billionaires gain disproportionate influence over policy, media, and public discourse, the gap between the powerful and the rest of society continues to widen. Research shows that a one-unit increase in the GINI coefficient, a standard measure of income inequality, results in a one-percentage-point rise in support for populist parties. This link between inequality and populism underscores how extreme wealth fuels political disillusionment and weakens the democratic fabric.
Extreme wealth fuels inequality and generates economic instability
According to economist Joseph Stiglitz, inequality weakens demand across the economy because lower-income families spend a larger fraction of their income than those at the top. This disparity not only hampers current economic activity but also threatens future growth by limiting work, education opportunities and quality of life for those lower in the income distribution. Moreover, Stiglitz argues, societies with greater inequality are less likely to invest in public goods that enhance productivity, such as transportation, infrastructure, technology, and education.
In contrast, tax cuts for the rich overwhelmingly benefit their own fortunes, with little to no impact on jobs or the broader economy, as a London School of Economics’ study found. Instead, research has shown that reduced wealth of the top 1 percent combined with greater wealth of the bottom 99 percent has a positive effect on investment, consumption, and employment.
The unchecked political and financial power of the super-rich skews policymaking and destabilises the everyday economy. Nowhere is this more evident than in housing markets, where extreme wealth fuels speculation, pricing out ordinary citizens. In Spain, real estate speculation by ultra-wealthy investors and hedge funds has exacerbated the housing crisis. Residents in cities like Barcelona and Madrid face skyrocketing rents while luxury developments cater to the super-rich. Attempts to introduce rent controls face resistance from influential property magnates.
Moreover, extreme wealth accelerates environmental breakdown, leading to rising prices of essentials, economic and social instability, and ultimately imposing significant costs on individuals and public finances. The super-wealthy’s disproportionate carbon footprint stems from investments in high-pollution industries and carbon-intensive lifestyles. Ultimately, Europeans face a choice: either continue enabling the excesses of the super-rich, leaving ordinary people to bear the costs of environmental breakdown and economic instability, or prioritise policies that ensure broad-based prosperity within ecological limits.
Taxing the wealth of the super-rich and the need for an extreme wealth line
When economic systems fail most people, trust erodes, paving the way for authoritarianism. As the U.S. struggles with oligarchic power, Europe must act before reaching a similar crisis.
The New Economics Foundation (NEF) has proposed that an extreme wealth line (EWL) – a metric or set of metrics which indicate the point at which extreme wealth concentration harms democracy, society, the economy, and the environment – is a critical tool to address the overlooked role of extreme wealth in the safety and stability of all our lives, redefining wealth norms, promoting economic fairness and supporting more effective policies such as wealth taxation.
Taxing wealth effectively reduces inequality, strengthens tax systems, and generates revenue. The 2024 G20 summit, under Brazil’s presidency, placed extreme wealth taxation on the global agenda. According to Oxfam, a global annual wealth tax of up to 5 percent on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year, enough to lift 2 billion people out of poverty. The EU Tax Observatory estimate a 2 percent minimum tax on European centi-millionaires would neutralise the regressivity of European tax systems and raise €67 billion; and a 3 percent minimum tax would make European tax systems slightly progressive and raise €121 billion.
And there’s support for these measures from the wealthiest in society. This year, more than 370 millionaires and billionaires from 22 countries – including over 50 EU-based – urged elected leaders to tax extreme wealth to protect democracy. Technological advances, public support, and increased tax transparency create an opportunity to implement effective wealth taxes. Recent proposals in France and Spain indicate growing momentum in Europe. The European Commission’s study on wealth distribution must build on this, placing extreme wealth firmly on the EU agenda.
Fernanda Balata is a senior political economist at the New Economics Foundation and author of the 2025 report Exploring an Extreme Wealth Line. She leads NEF’s international programme on extreme wealth and economic justice in collaboration with a network of partners in the global south and the global north.
Sebastian Mang is a political economist and leads the New Economics Foundation’s work on EU economic policy. He previously worked at Greenpeace on climate and energy issues and as a policy advisor for a Green MEP on legislation, including the European Climate Law and the Emissions Trading System.
