Rule by the Rich
ECONOMICS, 22 Oct 2012
Jerry Mander, New Left Project – TRANSCEND Media Service
In an extract from his upcoming book The Capitalism Papers, influential activist Jerry Mander describes the sheer scale of the rich’s control of the global economy and how they are seeking new territory in which to invest their wealth.
Binghamton University professor emeritus James Petras sums up the new growing problem this way in “Canadian Dimension” (April 7, 2011): “The current concentration of wealth exceeds any previous period in history; from King Midas, the Maharajahs, and the Robber Barons to the Silicon Valley – Wall Street moguls.” Petras argues that in most countries, including the United States, the sudden emergence of a large, super-rich class of billionaires has been significantly promoted by nation-states and lower-level governments, conspiring with the wealthiest classes to serve their interests over all others:
“What is striking about the recovery, growth, and expansion of the world’s billionaires is how dependent their accumulation of wealth is based on pillage of state resources; how much of their fortunes are based on neo-liberal policies which led to the takeover at bargain prices of privatized public enterprises . . . that the state – not the market – plays the essential role in facilitating the greatest concentration and centralization of wealth in world history . . . The sources of billionaire wealth are, at best, only partially due to ‘entrepreneurial innovations.’ ”
A similar view was expressed by Bill Moyers in 2010 in a daring speech to the Environmental Grantmakers Association (an organization comprising more than seven hundred wealthy philanthropists and foundation executives), in which he cited a 2005 publication by Citigroup entitled “Revisiting Plutonomy: The Rich Getting Richer.”
Plutocracy is rule by the rich. Plutonomy is an economy where the government helps them do it. . . . The world is dividing into two blocs: plutonomy and the rest. . . . Asset booms, a rising profit share, and favorable treatment by market-friendly governments have allowed the rich to prosper . . . and to take an increasing share of income and wealth over the last twenty years. . . . The top 10 percent, particularly the top 1 percent of the United States, have benefited disproportionately, especially from globalization and the productivity boom, at the relative expense of labor.
Since 2005, the figures have gotten even more distorted. And, predicts Moyers, the ultra-wealthy “are likely to get even wealthier in the coming years, because the dynamics of plutonomy are now intact. Plutocracy and democracy don’t mix. Plutocracy too long tolerated leaves democracy on the auction block.” Democracide.
Moyers adds, “After the Reagan years and the Bush tax cuts, by 2007 the wealthiest 10% of Americans were taking in 50% of the national income. A fraction of people at the top now earn more than the bottom 120 million Americans.” Public Citizen, the Ralph Nader-founded political action group, puts the exact number at “1% of Americans, who earn more than the bottom 120 million Americans.”
Chrystia Freeland, in her Atlantic article “The Rise of the New Global Elite” (January/February 2011), points out that “before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. . . . But the financial crisis and its long dismal aftermath have changed all that. A multibilliondollar bailout and Wall Street’s swift reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this in turn has led to wider – and not unreasonable – fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsized political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarified economic bubble.” She quotes one woman at a dinner party complaining that though she made $20 million in the prior year, she was disgusted that after taxes it would be only $10 million. It seemed like theft to her.
Freeland believes that two factors have recently accelerated the trend. The first is the set of recent technological breakthroughs that have converted previously small players into gigantic economic superstars and have allowed bankers to operate instantaneously across oceans. A second ingredient, by now most important, has been the actions of governments which have served their wealthiest plutocrats – let’s call them clients – with favors, subsidies, and good deals. Freeland describes it as very worrisome that “individual nations have offered contributions to income inequality – financial deregulation and upper-bracket tax cuts in the United states; insider privatization in Russia; rent-seeking in regulated industries in India and Mexico.”
Freeland quotes economists Emmanuel Saez, of UC Berkeley, and Thomas Piketty, of the Paris School of Economics, who say that “between 2002 and 2007, 65 percent of all income growth in the United States went to the top 1 percent of the population. The financial crisis interrupted this trend temporarily, as incomes for the top 1 percent fell more than those of the rest of the population in 2008.” They quickly recovered. After that down year of 2008, “the top 25 hedge fund managers were paid, on average, more than $1 billion each in 2009.”
A later report, from the Congressional Budget Office, confirmed that “from 1979 to 2007, average inflation-adjusted after tax income grew by 275 percent for the 1 percent of the population with the highest income.” For the top 20 percent of the population, the growth rate was 65 percent. Meanwhile, according to the New York Times (October 26, 2011), “people in the lowest fifth of the population received about 5 percent of total after-tax household income in 2007, down 7 percent from 1979. People in the middle three-fifths of the population saw their shares decline by 2–3 percentage points.” The gap between rich and poor is rapidly accelerating. This has become a rallying point for the Occupy movement.
Doing the Numbers
There is a mountain of data on the amazing growth of extreme inequities in both the United States and the rest of the world, during the last few decades. One is seriously tempted to do a whole book of just these astounding numbers, because they so exquisitely reveal the state of things these days. Author and filmmaker Koohan Paik is seriously thinking of doing exactly that. She says she may call it The Plutonomy Fun Book.
But the mind boggles when poring through too much of this stuff. So we decided to reduce the citations to just a dozen of our top favorites, and we will take it from there, as follows:
• According to Credit Suisse Research Institute (2010), “The bottom half of the global population together possess less than 2% of global wealth . . . In sharp contrast, the richest 10% own 83% of the world’s wealth, with the top 1% alone accounting for 43% of global assets.”
• Also from Credit Suisse: “To be among the wealthiest half of the world, an adult needs only $4,000 in net assets. . . . To belong to the top 10% of global wealth holders, each adult requires $72,000 in net assets.” Let’s repeat that one: If you have $4,000 in personal wealth – a bank account, property, machinery – that amount is sufficient to put you in the upper half of wealthiest people in the world. If you have $72,000, you are in the upper 10%.
• Credit Suisse says that being a member of the top 1% of global wealth holders “requires net assets of only $588,000.” In other words, if you own a paid-for house, or an almost-paid-for house, in the United States, you are probably among the top 1% of wealthiest people in the world. I am sure you are as surprised to learn that as I was.
• “Members of the top decile [10% of the world’s wealth] are almost 400 times richer, on average, than the bottom 50%, and members of the top percentile are almost 2,000 times richer” (James B. Davis, Susanna Sandström, Anthony Sharrocks, and Edward N. Wolff, “The World Distribution of Household Wealth,” a report by the United Nations University World Institute for Development Economics Research).
• “The average income in the richest 20 countries is 37 times the average in the poorest 20 – a gap that has doubled in the past 40 years” (World Development Report 2000/2001 Overview).
• “The world’s richest 500 people earn more than the 416 million poorest” (“Poverty to Power: Shocking Facts,” Oxfam, U.K.).
• “The world’s four richest citizens – Carlos Slim (Mexico), Bill Gates (U.S.), Warren Buffett (U.S.), and Mukash Ambani (India) . . . control more wealth than the world’s poorest 57 countries” (Carl Pope, Foreign Policy, January, 2011).
• “The income of the richest 25 million Americans is the equivalent of nearly 2 billion of the world’s poorest persons” (“Poverty and Inequality in the Global Economy,” Michael Yates, Monthly Review, February, 2004).
• In 2008, “the richest 1% of Americans [held] wealth worth $16.8 trillion, nearly $2 trillion more than the bottom 90%” of Americans” (“The Rich and the Rest of Us,” by John Cavanagh and Chuck Collins, The Nation, June 30, 2008.).
• Also from Cavanagh and Collins: “A worker making $10 an hour would have to labor for more than 10,000 years to earn what one of the 400 richest Americans pocketed in 2005.”
• “In 1962, the wealth of the richest one percent of U.S. households was roughly 125 times greater than that of the typical household. By 2004, it was 190 times” (“By the Numbers,” Inequality.org).
A few more figures help demonstrate the degree of inequality among countries: The richest countries in the world, including, for example, Norway, Sweden, the United States, and Luxembourg, enjoy a per capita GDP ranging from $45,000 to $122,000 per person. The poorest countries, including most of Africa, have per capita GDPs below $500. The average is at the level of Mexico, which is the sixtieth-wealthiest country (among 187), at $10,800 GDP per person, according to the World Economic Outlook Database, International Monetary Fund, September 2011.
All GDP per capita figures in poor countries are actually misleadingly high. A small handful of the richest people have skimmed most of their wealth off the top by controlling wealth-producing mineral resources or land or the government itself. So the poorest half of society really has nearly nothing.
Summing things up in Foreign Policy (March 2012), Charles Kenny, of the New America Foundation, adds this comment on prevailing inequities: “To make it into the richest 1 percent globally, all you need is an [annual] income of around $34,000 . . . . The average family in the U.S. has more than three times the income of those living in poverty in America, and nearly 50 times that of the world’s poorest. Most of America’s 99 percenters, and the West’s, are really 1 percenters on a global level.”
What Is a Billion Dollars?
In a Truthout article, “Nine Pictures of the Extreme Income/Wealth Gap” (February 14, 2011), Dave Johnson points out that quite a few people now make over $1 billion per year, every year, and then asks: “How much is a billion dollars? Can you visualize such an amount of money?” It’s not easy.
If you earn the median income in the United States, which Johnson estimates at about $50,000 (we have quoted others who put it lower), “and don’t spend a single penny of it, it will take you 20,000 years to save a billion dollars.”
Johnson goes on to ask what people do with all that money. Well, there are luxury cars, like the Maybach, that cost up to $1 million each. “Rush Limbaugh, who has 5 homes in Palm Beach,” owns six Maybachs. “Your billion [could] buy you a thousand Maybach Landaulets.”
There are hotels where a one-night stay costs $20,000–$30,000. Some people pay it. “A billion dollars will buy you a $20,000 room every night for 137 years,” Johnson points out. But in each of those years, you earn another billion, so cost doesn’t really matter. You can also buy a private jet for $40–60 million; you could actually buy quite a few of them. Private islands seem to go for another $25 million or so, give or take a few million. You could buy forty of them with this year’s billion alone. And voil. – you’d be a major landholder.
And there are yachts. There was even a famous “yacht war” that got started in 1997 among the super-wealthy, competing with each other for the biggest. First, Leslie Wexner of Limited Brands bought a 316-foot vessel, some 110 feet longer than anything in its category. That cost about $300 million. But Russia’s Roman Abramovich outdid him, buying three super-yachts of the same kind. Then Paul Allen, cofounder of Microsoft, outdid them both, with a 413-foot yacht that boasts a basketball court, a heliport, a movie theater, and a submarine in the hold.
The “Problem” of Surplus Capital
Jack Santa Barbara is a retired businessman. He is wealthy, though not in a class with the kind of oligarchs we have been discussing. He has lately been writing on the consequences of plutocracy. In a 2011 special report published by the International Forum on Globalization, “Outing the Oligarchy,” Santa Barbara contributed an article about the pressures that the very wealthy feel as they search continuously for ways to profitably spend their mounting surplus capital:
Extreme inequality means that a small number of people have much more financial wealth than they can use for their own pleasure, or even for a comfortable life. They need to find places to park their excess capital. If they let their money just sit in a normal low interest bank account, they would consider that a business loss. They feel they must maximize the growth potential of every dollar; that’s endemic to their training and way of life. This often leads them to speculation in high-risk investments and bubbles, which sometimes collapse. The speculative mortgage housing bubble, which burst in 2008, is an example.
That excess money also becomes available to influence the political process. The very rich are easily able to intervene on a broad scale. They not only fund various political campaigns (often backing opposing candidates to ensure influence), but they contribute to drafting party platforms, supporting special interest groups, and setting up think tanks to push their narrow self-interested agendas.
In internal correspondence from IFG, Santa Barbara reports, “The oligarchs are smart. They have realized that the global economy is starting to die. It’s short on resources, and the costs for what remains are skyrocketing. The prospects for rapid economic growth in the real economy, and for sustained high-level “surplus value,” are sharply diminished. So, many of the wealthy are coming to the view that they will no longer seek business growth, per se. More and more of them are seeking political control as a way of gaining economic expansion. They can squeeze out more by controlling the political process – toppling unions, gaining subsidies, cutting their taxes, gaining offshore havens – and, perhaps most of all, by privatizating services like education, transportation, the military, security, Medicare and Social Security, health services, and many aspects of the natural commons, like fresh water. That’s their big new market: commodification of the commons.”
Republicans and especially Tea Partiers are now also advocating for privatizing whole government agencies, even those providing welfare services, for example. It represents a very profound shift in corporate/state/oligarch strategy, and is potentially much more pervasive and dangerous. All of it has been made necessary by the reality of declining resources and the stunted growth potential of the usual means of wealth expansion. Through campaign contributions, this class of super-rich already “owns” many of the U.S. state houses and legislatures, the House of Representatives, and, as we said, an alarming number of U.S. senators. The election of 2012 has a fair chance to also bring them control of the Senate, and quite conceivably the presidency. If so, we should probably start calling it neofeudalism. A privatized country.
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Copyright © 2012 by Jerry Mander from The Capitalism Papers: Fatal Flaws of an Obsolete System. Reprinted by permission of Counterpoint.
Jerry Mander is an American activist and author, best known for his 1977 book Four Arguments for the Elimination of Television.
Submitted by email by Mrs. Björn Lindgren.
This article originally appeared on Transcend Media Service (TMS) on 22 Oct 2012.
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