|September 24, 2012|
We learned a great deal about inequality last week. From a secretly taped video, we learned how incredibly clueless and shallow our awesomely affluent can be when they gather together, behind closed doors, and talk about the rest of us.
A useful lesson. But last week also brought other potentially useful lessons — about inequality — that never had a chance to sink in. These lessons flashed across the news cycle and then almost instantly sank out of sight.
The Census Bureau, for instance, reported midweek that the income gaps that divide Americans are now widening at an even faster clip. And a new global wealth report detailed how the average net worth of the world's “ultra high net worth” households — those households worth over $30 million — fell almost everywhere last year, except the United States.
The fortunes of America's richest 400, Forbes added Wednesday, have jumped 13 percent since last September. How can this be happening? How can we go about narrowing our great divide? In this week's Too Much, we have some ideas.
|GREED AT A GLANCE|
Parking in the sky? If you have the cash, these days the sky’s no limit. Just outside Miami, developer Gil Dezer is collaborating with Porsche Design on a new 57-story condo tower that features a 600-feet-per-minute elevator for fine motorcars. The elevator will deposit autos in special parking spaces that sit behind glass partitions. Why glass for a garage? Explains Dezer: “If you want to see your car from the living room, you can.” Construction on the tower starts next year. Manhattan already has a car-elevator tower, as does Singapore, where a penthouse with sky parking for four cars can run up to $24 million . . .The problem with sky parking? Motorists still have to park at dicey ground level when they venture out. Rolls Royce to the rescue! The luxury automaker's new Phantom model sports a hood ornament that automatically disappears should any terrestrial thief try to snatch it. The Phantom starts at $500,000. No sticker shock there for Citigroup CEO Vikram Pandit. He’ll be pocketing $24 million for his latest year's labor, news reports indicate, a sum that will bring Citi’s total five-year outlay to Pandit to $261 million. Over in Germany, Werner Wenning has had enough with paydays like Pandit’s. The former Bayer CEO, now a Deutsche Bank director, has just signaled his support for CEO pay caps. No exec, he says, “needs to earn an amount in the double-digit millions.”
Silicon Valley’s most image-conscious high-tech titans, commentator Nick Bolton quipped last week, would have us believe they “eat ramen noodles for dinner and drive old, clunky Hondas to work.” Behind the scenes lurks a somewhat different reality. At Facebook, 250 of the company’s richest have a secret email list where they “discuss things they plan to buy when they sell their hundreds of millions of dollars in stock.” The founder of Yammer, a company sold to Microsoft earlier this year for $1.2 billion, also likes his secrecy. He asked guests at his 40th birthday party this past June not to share any photos of the $1.4 million bash. They did anyway. Photos of party-goers dressed up in French royal court garb from the 18th century soon flooded the Internet. The party’s theme: “Let them eat cake.”
Quote of the Week
“Good intentions, like mother’s milk, are a perishable commodity. As wealth accumulates, men decay, and sooner or later an aristocracy that once might have aspired to an ideal of wisdom and virtue goes rancid in the sun, becomes an oligarchy distinguished by a character that Aristotle likened to that of 'the prosperous fool' — its members so besotted by their faith in money that 'they therefore imagine there is nothing that it cannot buy.'”
|PETULANT PLUTOCRAT OF THE WEEK|
|labeled one of his legendary parties in the Hamptons, the uber-wealthy watering hole, a “nude frolic.” Leder griped that he spends only “a small” fraction of his time throwing parties. But “rather than reporting on how I spend 340 days and nights of my year,” he fumed, “the media likes to report on the other 25.” Now the media likes to report on his swank fundraisers. That private event for Mitt Romney that made headlines last week? Leder hosted that affair last May at his Boca Raton mansion. Romney, turns out, inspired Leder to try private equity in the first place. Leder has so far funneled $230,000 to Mitt's election. At the May fundraiser, a grateful Mitt had a shout-out for Leder and his manse. We won’t have “houses like this,” said Mitt, “if we stay on the road we’re on.”Private equity king Marc Leder has a few bones to pick with the media. He started picking a year ago after the New York Post|| |
|ROGRESS AND PROMISE|
|will be voting this March on an initiative that would ban “golden parachutes” for CEOs and give shareholders a binding up-or-down vote on executive pay. Economiesuisse, the Swiss business lobby, has launched an assault on the initiative. The group's preferred substitute would give shareholders only an advisory say on pay, the same right U.S. shareholders now hold. But Economiesuisse faces still more headache on the horizon: The Social Democratic Party’s youth arm has gained ballot status for an initiative that would cap executive salaries at 12 times the pay that goes to a company’s lowest-paid workers. Last year's top-paid Swiss corporate exec, the American Joseph Jimenez of drugmaker Novartis, took home $16.74 million.Corporate life in Switzerland may be about to get more complicated. Swiss citizens|| |
The statutes of limitations on the frauds that fueled the 2008 Wall Street meltdown are running out. Help demand that the Financial Crisis Task Force get serious about indicting Wall Street power suits.
|inequality by the numbers|
Stat of the Week
How much more can Charles and David Koch, America's most prolific billionaire bankrollers of right-wing political causes, afford to pour into this year’s elections? If the brothers Koch spent $1 billion on the 2012 elections, Forbes figures released last week show, they would still end this year with a net worth over $5 billion greater than their net worth in 2011.
The ‘Self-Made’ Myth: Our Hallucinating Rich
In real life, working hard only takes you so far. Those who go all the way — to grand fortune — typically get a substantial head starts. So documents a new analysis of the Forbes 400.
Let’s cut Mitt Romney some slack. Not every off-the-cuff comment the GOP White House hopeful made at that now infamous, secretly taped $50,000-a-plate fundraiser last May in Boca Raton reveals an utterly shocking personal failing. Take, for instance, Mitt’s remark that he has “inherited nothing.”
A variety of commentators have jumped on Romney for that line. They’ve pointed out that Mitt, the son of a wealthy corporate CEO, has enjoyed plenty of privilege, everything from an elite private school education to a rolodex full of rich family friends he could tap to start up his business career.
On top of all that, the young Mitt also enjoyed $1 million worth of stock his father threw his way to tide him over until big paydays started arriving.Not quite “nothing.” But no reason to pick on Mitt either. Most really deep pockets, not just Mitt, consider themselves entirely “self-made.” The best evidence of this predilection to claim “self-made” status? The annual September release of the Forbes magazine list of America’s 400 richest.
Each year Forbes celebrates the billionaires who populate this list as paragons of entrepreneurial get-up-and-go. The latest top 400, Forbes pronounced last week, “instills confidence that the American dream is still very much alive.”
Of America’s current 400 richest, gushes Forbes, 70 percent “made their fortunes entirely from scratch.”
Forbes made the same observation last year, too, and most news outlets took that claim at face value. Researchers at United for a Fair Economy, a Boston-based group, did not. UFE analysts stepped back and took the time to investigate the actual backgrounds of last year’s Forbes 400. They released their findings last week, on the same day Forbes released its new 2012 top 400 list.
The basic conclusion from these findings: Forbes is spinning “a misleading tale of what it takes to become wealthy in America.” Most of the Forbes 400 have benefitted from a level of privilege unknown to the vast majority of Americans.
In effect, as commentator Jim Hightower has aptly been noting for years, most of our super rich were born on third base and think they hit a triple.
In its just-released new report, United for a Fair Economy extends this baseball analogy to last year’s Forbes 400. UFE defines as “born in the batter’s box” those Forbes 400 rich who hail from poor to middle-class circumstances. Some had nothing growing up. Others had parents who ran small businesses.About 95 percent of Americans, overall, currently live in these “batter’s box” situations. Just over a third, 35 percent, of the Forbes 400 come from these backgrounds.
Just over 3 percent of the Forbes 400, the United for a Fair Economy researchers found, have left no good paper trail on their actual economic backgrounds. Of the over 60 percent remaining, all grew up in substantial privilege.
Those “born on first base” — in upper-class families, with inheritances up to $1 million — make up 22 percent of the 400. On “second base,” households wealthy enough to run a business big enough to generate inheritances over $1 million, the new UFE study found another 11.5 percent.
On “third base,” with inherited wealth over $50 million, sit 7 percent of America’s 400 richest. Last but not least, the “born on home plate” crowd. These high-rollers, 21.25 percent of the total Forbes list, all inherited enough to "earn" their way into top 400 status.
Last year, a rich American had to be worth at least $1.05 billion to make the Forbes 400. This year’s entry threshold: $1.1 billion, the highest ever.
Forbes, the United for a Fair Economy researchers sum up, has glamorized the myth of the “self-made man” and minimized “the many other factors that enable wealth,” most notably the tax breaks and other government policies that help the really rich get ever richer.
The narrative of wealth and achievement that Forbes is pushing, the new UFE study adds, “ignores the other side of the coin — namely, that the opportunity to build wealth is not equally or broadly shared in contemporary society.”
And many of those who do have that opportunity — like the mega millionaires in Boca Raton who applauded so warmly when Mitt Romney asserted he had “inherited nothing” — see absolutely no reason to turn that coin over.
Jamelle Bouie, The Right’s Nonsensical Attack on Redistribution, American Prospect, September 19, 2012. Every society redistributes. The key question: Who benefits?
Paul Krugman, Disdain for Workers, New York Times, September 21, 2012. A look at “what has become a party of the wealthy, by the wealthy, and for the wealthy, a party that considers the rest of us unworthy of even a pretense of respect.”
L. Randall Wray and Pavlina Tcherneva, Romney: The Little People Don’t Pay Taxes, New Economic Perspectives, September 19, 2012. A counter to the new conservative party line.
Timothy Noah, How to be a Real “Redistributionist,” New Republic, September 20, 2012. A basic agenda for narrowing America's grand economic divide.
Gretchen Morgenson, CEOs and the Pay-’Em-or-Lose-’Em Myth, New York Times, Septemner 23, 2012. A new study demolishes the boardroom “wisdom” that CEOs can and will readily transfer their talents from one company to another if they don't receive the windfalls they feel they deserve.
|new and notable|
James Gustave Speth, America the Possible: Manifesto for a New Economy. Yale University Press, 2012, 249 pp.Environmentalists know Gus Speth, the former United Nations Development Program chief, as one of our natural world’s most principled defenders. Now Speth is calling for “system change” profound enough to include limits on income. If the military can make do with top incomes that never run over 15 or 20 times the lowest service pay, Speth wonders, why must Corporate America have top executives taking home over 500 times what workers are making? In his latest book, America the Possible, Speth enthusiastically lays out an assortment of options for establishing what amounts to a “maximum wage.”