|October 29, 2012|
Some observers figured that Mitt Romney’s private equity fortune would shove corporate profiteering right onto this year’s media center stage. That hasn’t happened. Ask the 6,000 bakers at America’s largest bakery, Hostess Foods. Last week, Hostess slashed their pay 8 percent — and hardly anyone noticed.
Private equity boys had bought up Hostess, the maker of Twinkies and Wonder Bread, three years ago, borrowing heavily from hedge funds to finance the deal. The new CEO they installed proceeded to push union workers to accept — in the spirit of “shared sacrifice” — deep cuts to pay off the debt.
In the meantime, behind the scenes, Hostess was raising pay for the company's top execs by 80 percent. Then, after declaring bankruptcy this past January to void union contracts, Hostess asked the courts to okay a new CEO pay deal worth another $3.5 million. Amid the resulting furor, the CEO resigned, only to surface, two months later, as the CEO at another snack food company.
America’s hedge funds and private equity firms, says union leader Frank Hurt, couldn't care less that real people “have to endure the consequences of their greed.” In this week's Too Much, more greed, more consequences.
|GREED AT A GLANCE|
In luxury retail land, October spells Christmas — and the release of the latest annual Neiman Marcus holiday catalog. The new 52nd edition, now out, features“the poshest hen house ever imagined,” complete with chandelier for just $100,000. For a piddling $30,000, the Neiman Marcus shopper can land a walk-on role in Annie: The Musical and a five-star meal with the show’s producers. The most useful offering in this over-the-top assortment of plutocratic pleasures? That has to be the water-propelled jetpack that can, for a mere $99,500, lift any deep pocket 32 feet up in the air and speed that affluent 80 miles away. Buyers, one shopping maven notes, can use the jetpack “to escape the mobs with pitchforks.”America's most cited conservative jurist not yet sitting on the U.S. Supreme Court, Richard Posner, has taken to musing about the source of grand fortune — and does not “find any merit to the celebration of the tycoon.” All financial success, Posner posited earlier this month, boils down to chance, the luck of having wealthy parents or meeting the right people or being born with intelligence. If luck does trump all else, adds Posner, “a brilliant wealthy person like Bill Gates is not 'entitled' to his wealth in some moral, Ayn Randian sense.” But Posner still opposes steep taxes on the rich. He considers them disincentives. Counters legal analyst James Kwak: If the rich don’t have “any particular moral entitlement to their wealth because that wealth is the product of luck,” why not have them pay more in taxes than the poor and middle class?
Luck, thy name might be Richard Parsons, the University of Hawaii dropout whoparlayed a meet-up with Nelson Rockefeller four decades ago into a life at the corporate summit. In the past dozen years alone, Parsons has been the CEO and chairman of the board at Time Warner, the chairman at Citigroup, and a director at Estee Lauder Cosmetics, Madison Square Garden, and the investment bank Lazard. But the 64-year-old Parsons, who picked up $10.4 million for his last year of labor at Citigroup, may finally have found his true passion. He’s turning his hobby, a vineyard in Italy’s fabled Tuscany, into a going business concern. His Il Palazzone will soon be shipping out red wines that retail at up to $130 a bottle.
Quote of the Week
“The grand bargain crowd says we have to cut benefits to lower the deficit. But if they were serious about reducing the deficit, they would not propose to lower the top tax rate for the richest Americans, which wastes trillions of dollars.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Declared the 78-year-old: “Leave us alone and let us hire people.” Langone stakes his claim to job creator status on Home Depot, the retail giant his financing helped propel to big-box dominance. But big-box giants, notes the research group Good Jobs First,don’t create jobs. They “grow mostly at the expense of existing competitors,” many of them local businesses. Big-box giants, on the other hand, do create hefty wealth. Forbes last month estimated Langone's personal fortune at $1.6 billion.You can call Kenneth Langone an investment banker. But he’d probably much prefer the label his friend Mitt Romney likes to pin on deep pockets: “job creator.” This past June Langone enjoyed star billing at the Utah weekend that gathered together Romney’s biggest donors and key staff. Obama regulations, Langone claimed, were killing jobs.|
|PROGRESS AND PROMISE|
|worst industrial strife” since apartheid. One key cause: The nation's income gap, since 1994, has actually increased. Two weeks ago, South African president Jacob Zuma and allied national leaders called on the nation’s top corporate and public sector execs “to agree to a freeze in increases in salary and bonuses over the next 12 months, as a strong signal of a commitment to build an equitable economy.” Key business leaders quickly rejected the call. Freezing CEO pay, some even argued, would cost South Africa needed tax revenue. Left unnoted by the freeze foes: A simple tax rate increase could easily recoup any lost revenue. Wealthy South Africans currently face just a 40 percent top-income bracket tax rate.Over recent months South Africa has seen its “|
Help the “Yes Men,” the world’s most clever anti-plutocratic pranksters, kick start a new major motion picture.
|INEQUALITY BY THE NUMBERS|
Stat of the Week
In the United States, new Economic Policy Institutedata show, the top 1 percent have increased their share of national income by 10.1 percentage points since 1979. The top 1 percent increase in Germany: just 0.5 percentage points.
Keeping the Rich Comfy: Your Job Future?
We've lost our manufacturing economy in the United States. Now we're losing our service economy. We're rapidly becoming, some observers fear, a 'servant economy.'
Fire fighter, basketball player, lion tamer, teacher, nurse: Ask little kids what they want to be when they grow up, and you'll get all sorts of answers. But you’ll never hear this one. You’ll never hear youngsters say they want to devote their careers to serving rich people.
Today’s youth might want to reconsider. They’re facing an American economy where serving rich people increasingly seems to offer the best future with real opportunity. Or, as the economist Jeff Faux puts it, we’re well on the way to becoming a full-fledged “servant economy.”
We’ve had “servant economies” in the world before. At times, people even rushed toward servant status. In the early industrial age, jobs in mines and factories would be dirty and dangerous and pay next to nothing. Domestic work for rich families could seem, by comparison, a relatively safe haven.
But that calculus changed as workers organized and won the right to bargain collectively for a greater share of the wealth they were creating. Over the first half of the 20th century, America's super rich lost their dominance, and fewer and fewer Americans worked as servants for them.
This state of affairs didn't last long. Since the late 1970s we’ve witnessed an assault on the building blocks of greater equality — strong unions, steeply graduated progressive taxes, regulatory limits on business behavior — that has hollowed out the American middle class.
Good manufacturing jobs have largely disappeared, outsourced away. Most Americans no longer make things. They provide services.
We could, of course, have a robust “service” economy, if we built that economy on providing quality services to all Americans. But providing these quality services, in everything from education to health to transportation, would take a significant public investment — and significant tax revenue from America’s rich.
A half-century ago, we did collect significant tax revenue from America’s wealthy. No longer. Tax cuts have minimized that revenue and left public services chronically underfunded. That leaves young people today, as economist Jeff Faux points out in his new book The Servant Economy: Where America's Elite is Sending the Middle Class, with a stark choice.
Young people can become engineers and programmers and spend their careers in “pitiless competition with people all over the world” just as smart and trained but “willing to work for much less.” Or they can join the servant economy and “service those few at the top who have successfully joined the global elite.”
In this new “servant economy,” we’re not talking just nannies and chauffeurs. We’re talking, as journalist Camilla Long notes, “pilots, publicists, art dealers, and bodyguards” — a “newer, brighter phalanx of personal helpers.”
Want to see the world? In the new servant economy, you can become a “jewelry curator” and voyage to foreign lands to pick up gems for wealthy clients.
Want to face daily challenges? You can become a concierge and hire an elephant for a wealthy patron's wedding reception one day, get your patron a chess match with a grand master the next.
Or, if you lean toward the traditional, you can always shell out $12,000 for a month-long course that will certify you as a manservant in good standing with the Guild of Professional English Butlers.
A top butler can pull in well over $100,000 a year. But serving the rich can be far more lucrative than that. Interior decorator Michael Smith pulled in an $800,000 fee for his work on a Wall Street CEO’s office. New York attorney David Boies has a plutocrat-friendly law practice — and a reported $1,220 hourly fee.
John Blackburn, an architect in Washington, D.C., specializes in designing horse barns for wealthy equestrians. The barns run up to $3 million each. His fee, theWashington Post reports, ranges from 8 to 10 percent of each barn’s cost.
But we have a basic problem here. We have a limited pool of super rich who can afford to commission horse barns and ask for elephants.
As of this past summer, calculates the Credit Suisse Research Institute, only 38,000 Americans had fortunes worth at least $50 million. The entire world has only about 3 million people worth at least $5 million.
Even if those 3 million gave gainful “servant economy” employment, directly and indirectly, to an average 100 people each, we would still have another 4 billion or so people on the outside of the “servant economy” looking in.
The “servant economy,” as economist Jeff Faux makes clear, can only be a dead end. We need to change course.
Bill Moyers and Michael Winship, Plutocrats Want to Own Your Vote,Huffington Post, October 22, 2012. At no time in recent history has the top one hundredth of 1 percent owned more of our wealth or paid so low a tax rate.
Felix Salmon, CEOs’ self-serving deficit manifesto,Reuters, October 25, 2012. Puncturing the pomposity behind the latest corporate executive push for austerity economics.
Tax Poilcy Center, Major Tax Proposals by President Obama and Governor Romney, October 25, 2012. A good, clear comparison, including the tax pieces seldom mentioned: the tax hikes on the rich in Obamacare.
Tim Noah, Conservative Inequality Denialism, New Republic, October 25, 2012. A delicious demolition of the right’s latest stab at inequality denialism.
Joseph Stiglitz, Some Are More Unequal Than Others, New York Times, October 26, 2012. Market forces alone don’t explain U.S. inequality, since other nations that compete in the same global marketplace as the United States have far lower levels of inequality.
|NEW AND NOTABLE|
| Kurt Opprecht, on behalf of Thurston H., |
The Billionaires’ Manifesto. Smashwords.
Activist Kurt Opprecht has been a moving force behind Billionaires for Bush, the street theater group that has, in various guises, so delightfully lampooned our super rich and their pretensions. But this new book, ostensibly a how-to manual for locking plutocracy into permanent place, goes beyond simple satire to give a creepily accurate sense of how the super rich see the world and their exalted place in it. A reader can’t help noticing, as the Nation’s Richard Lingeman observes, how “Thurston H’s language eerily anticipates Mitt Romney’s.”
Global Price and Income History Group/ For historians and anyone who wants to learn from history, this new site explores how income distributions and levels of inequality have varied widely over time.