Billionaire Ken Griffin Says ‘Soaking the Rich Doesn't Work,’ Defends Capitalism

(Bloomberg) -- Ken Griffin, the billionaire founder of Citadel, blasted socialism and said raising taxes on the wealthy isn’t the solution to inequality.

“Soaking the rich doesn’t work," the hedge fund manager said Tuesday in an interview with Bloomberg Television from the Milken Institute Global Conference in Beverly Hills, California.

His comments contrast with those of billionaire Ray Dalio, who earlier this month sounded the alarm on capitalism’s flaws and advocated for some higher taxes on the wealthy among other solutions.

Griffin said education, not the capitalist system, is broken in America. Government subsidies for student loans have created profound economic distortions, he said.

You have a generation of students who are “completely disillusioned with their economic prospects given the huge amount of debt that they’ve been saddled with, courtesy of the U.S. government, combined with the extraordinarily high cost of education they’ve been paying, courtesy of the U.S. government," Griffin said in a separate interview earlier Tuesday at the conference with former junk bond king Michael Milken.

Griffin, 50, was adamant that socialism isn’t the answer, calling its track record "one of complete failure."

He pointed to the current economic and humanitarian crisis in Venezuela, where the nation’s opposition leader has called for a military uprising in an effort to unseat socialist President Nicolas Maduro’s regime.

The millennial generation doesn’t appreciate the downside of socialism like former generations, Griffin said. The audience cheered after Milken played a video clip of Margaret Thatcher lauding capitalism and a free society. To tackle income inequality, policy makers must tackle education and criminal justice reform, said Griffin.

Other highlights from the interviews:

  • When asked if Citadel would go public, Griffin said that although the firm is reaching a point where it probably becomes the right thing to do given its scale, he enjoys the flexibility that comes with being privately held.
  • The lack of liquidity in financial markets is a bit of a myth, Griffin said. It’s never been cheaper to trade equities and swaps.
  • With more private capital available, firms can grow and wait longer before going public. This means there are fewer growth stocks available to the average investor, he said.
  • Griffin said to improve education in inner-cities, schools should mandate longer days and years.

Griffin, who founded Chicago-based Citadel in 1990, started trading convertible bonds from his dorm room at Harvard University. The firm today manages $29 billion with offices around the world.

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