Rising political tensions reflect tremendous wealth disparities, according to billionaire trader Paul Tudor Jones.
To ensure that these issues do not lead to calamity, Jones is urging companies to step up. He’s also turned data on what companies are doing to address such concerns into an ETF, launched in partnership with Goldman Sachs, that adjusts its holdings yearly to reflect corporate behavior.
Speaking at the Inside ETFs conference Monday near Miami before several thousand advisors and investors — less than a year after the corporate behavior-focused Goldman Sachs JUST U.S. Large Cap Equity ETF began trading — Jones said, “I had no idea the ETF nation is so huge!”
The Just ETF, which he helped launch last summer, is “the story of capitalism and how it is floundering in its current form,” Jones said of the fund’s origins.
He highlighted the words of Adam Smith: “If justice is removed, the great, the immense fabric of human society … must in a moment crumble into atoms.”
Today’s climate is toxic. “Think of the income disparity we have today in the U.S. I have not seen this social divide since I was a kid in the ‘60s and ‘70s,” he said.
Less than half of millennials view capitalism positively, according to Jones. “It’s no surprise. Eighty-two percent of wealth last year went to the top 1%. This situation is not sustainable. Some experts say that such disparity will end in cataclysm.”
He points to lower tax rates and the popular idea espoused by Milton Friedman as two culprits: “When Friedman said a corporation’s social responsibility is to increase profits … it was like catnip” to the private sector.
Since the ‘70s, the bottom 90% of the public has lost about 12% of its wealth to the top 10%, leaving it with 23% of total U.S. wealth.
What to Do
To reverse this situation — for the good of the American public and capitalism – it’s important to redefine corporate stakeholders, Jones said, so the group includes employees, the community in which it operates and the environment — not only shareholders.
“We must have a contract that builds trust,” he explained. “Greater income disparity means more mistrust … as well as social unrest and unhappiness.”
Jones also wants to “use capitalism itself” — which drives the bulk of the $19 trillion U.S. economy — to move forward.
“That’s why I started Just Capital five years ago,” he said. “Enlightened CEOs are not focused on short-termism.”