Pershing Square Capital Management CEO Bill Ackman issued a call on Friday for the U.S. to fix soaring wealth inequality and save capitalism by giving every child born in America an investment account.

Like other wealthy investors, the billionaire hedge fund manager has called for governments to attack the growing gap between the rich and the poor, which is sparking widespread social unrest and backlash against capitalism.

However, unlike several of his billionaire peers, Ackman issued issued a full-throated defense of free markets.

“Despite its faults, we are strongly of the view that, while far from perfect, capitalism is by far the best system for maximizing the size of the economic pie,” Ackman wrote in a letter to investors.

However, “one of the principal problems with capitalism, particularly as it has functioned over the last several decades, is that wage growth has not kept pace with long term wealth creation” — disproportionately excluding the middle and working classes, he wrote.

Like the coronavirus pandemic, the fallout from wealth inequality “present[s] black-swan-type risks for investors,” Ackman wrote.

As a solution, he proposed helping those “with no investment assets to participate in the success of capitalism. We need a program that makes every American an owner of the compounding growth in value of corporate America,” the investor wrote.

“Compounded returns over time are indeed one of the great wonders of the world, and every day we wait to address this issue, the problem looms larger,”he added.

Staving off a ‘turn toward Socialism’

Specifically, the 54-year-old activist investor suggested that the government create investment accounts for every baby born in the U.S. that would invest in no-fee stock index funds, and withdrawal from those funds wouldn’t be allowed until retirement.

” Without funds to invest for retirement – particularly after the housing crash destroyed many Americans’ only other source of long-term wealth creation – one has almost no hope to build wealth for retirement, or to give the next generation a head’s start,” Ackman added.

According to Ackman, assuming a rate of 8% per year, investing $6,750 in an account at birth would yield assets of more than $1 million by age 65. It would cost the government $26 billion per year, based on the average number of children born in the U.S.

In addition, the billionaire suggested that companies should be required to put a fixed percentage of a worker’s salary or wages in a tax-free investment account that couldn’t be touched until retirement. In that way, it would mimic Australia’s successful superannuation system.

He also advocated for financial literacy, which is just as important as access to investing.

According to Ackman, the American Dream “has become a disappointment or worse for far too many.” He added that if capitalism continues to leave people behind and wage growth lags, Americans will “seek changes, potentially radical ones, to the current system, or seek an alternative system.”

Ackman wrote that solving the wealth divide is incumbent upon everyone, especially the capitalist system’s greatest beneficiaries.

“Like those who rent rather than own their homes and thereby have no love lost for their landlords, Americans that have no ownership in the success of capitalism, and who are suffering economically, are more motivated to turn toward Socialism or other alternatives,” the investor wrote.

Pershing Square Holdings, Ackman’s hedge fund firm’s publicly-traded vehicle, is up 44.1% year-to-date, far outpacing the broader market.

20 PHOTOSAmerica's wealthiest family's spending habitsSee GalleryAmerica's wealthiest family's spending habits

Sam Walton, who died in 1992, opened the first Walmart store in Arkansas in 1962. 

Photo credit: Getty

He was married to Helen Ronson. Together, they had four children: Rob, John, Jim, and Alice. 

The Walton family own 50% of Walmart’s total stock between them.

Photo credit: Getty

This is Samuel Robson "Rob" Walton, the oldest Walton son. He served as chairman of Walmart until 2015. 

Photo credit: Getty

He has a house in Paradise Valley, Arizona, near the base of Camelback Mountain. In the past, protesters have rallied outside of his Arizona home to advocate for better wages and benefits for Walmart workers. 

Photo credit: Google maps

He also has a large collection of vintage cars. In 2013, he ran his Daytona Coupe, which was at the time worth $15 million, off the tracks and wrecked it. The car was one of only five ever made. 

Photo credit: Getty

John Walton, pictured here second from left, died in a plane crash in 2005, at the age of 58. 

Photo credit: Reuters

John was married to Christy Walton and had one son, named Lukas. John left about 17% of his wealth to his wife, and the rest was given to charity and to his son. 

Photo credit: Getty

James "Jim" Walton is the youngest son. He is estimated to be worth $42.1 billion. He is chairman of the board of the family’s Arvest Bank, which has assets that total more than $18 billion. He also served on the Walmart board before being replaced by his son Steuart in 2016. 

Photo credit: Getty

The youngest sibling, Alice Walton, is worth $40.4 billion. She has been divorced twice and has no children. 

Photo credit: Getty

Alice has never taken an active role running the business and has instead become a patron of the arts. She fell in love with the arts at a young age. When she was 10, she bought her first work of art: a reproduction of a Picasso painting for about $2, she told The New Yorker. 

Photo credit: Getty

She has an immense private art collection, with original works from Andy Warhol and Georgia O’Keefe. 

Photo credit: Getty

Alice opened a museum called Crystal Bridges in 2011 to house her $500 million private art collection. When it opened, it had four times the endowment of the famous Whitney Museum in New York. 

Photo credit: Reuters

In 2014, she spent $44.4 million on a Georgia O’Keefe painting. It was the biggest sale for a woman’s piece of art in history. 

Photo credit: Getty

Alice is also a breeder of horses. Her Millsap, Texas, property, Rocking W Ranch, recently sold for an undisclosed amount. It had an initial asking price of $19.75 million, but was most recently listed for $16.5 million. The working ranch has over 250 acres of pasture and outbuildings for cattle and horses. 

Photo credit: WilliamsTrew

Her other 4,416-acre Texas ranch was previously listed at a reduced price of $22 million. The modest, three-bedroom, two-bath home overlooks a river. 

Photo credit: WilliamsTrew

Alice also owns a two-floor condo on New York’s Park Avenue. She bought the property for $25 million in 2014. It has more than 52 large windows overlooking Central Park, plus a media room and over 6,000 square feet of space. 

Photo credit: Streeteasy

In January 2016, Alice donated 3.7 million of her Walmart shares — worth about $225 million at the time — to the family’s nonprofit, the Walton Family Foundation. The charity donated around $530 million in 2017. 

Photo credit: Facebook

Walmart Inc., which owns Walmart and Sam’s Club, is the largest retailer in the US in terms of revenue, with sales of $500.34 billion per year. 

Photo credit: Getty

When Walmart has a good quarter, the Waltons make hundreds of millions of dollars in dividends. 

Photo credit: Getty

In its more recent quarterly results, reported in May, the company’s share price climbed by 1.1% after online sales soared by 33%. 

Photo credit: Getty

See Gallery

Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter. 

• Ackman looks to ‘marry a unicorn’ with record-breaking SPAC

• Ackman sees ‘real recovery’ in back half of 2021, remains upbeat of offices and restaurants

Source: Read Full Article