DANCING NEBULA

DANCING NEBULA
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Monday, January 28, 2013

To End Extreme Poverty, End Extreme Wealth

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THIS WEEK

The share of Americans who carry union cards, the U.S. Department of Labor reported last week, has dropped to 6.6 percent of the private-sector workforce. The union presence in America’s private-sector workplaces, two Rutgers economists are now estimating, hasn’t been this low since 1916.

How high have union rates gone? Back in the 1950s, 35 percent of America's private-sector workers held union status. This broad union presence helped institutionalize “norms for fair pay” for all workers, union and nonunion alike. Corporate execs essentially had to share the wealth, at least somewhat.

Not anymore, not with unions almost nonexistent across large swatches of America’s private sector. The result? We have a level of pay inequity between our top 1 and bottom 90 percent that has reached astounding proportions.

America, President Obama observed in his inaugural address last week, “cannot succeed when a shrinking few do very well and a growing many barely make it.” Inside this week’s Too Much, much more on our few and our many.


GREED AT A GLANCE

South Koreans enjoy Internet access today at speeds that run well over 100 times faster what most Americans can get — at half the monthly cost Americans typically pay. What do we have that South Koreans don't? We have high-tech corporate execs routinely pulling in mega millions for delivering second-rate technology. The latest sign of the immense fortunes our high-tech titans are raking in: News reports last week revealed the late November sale of a Silicon Valley home for $117.5 million, the second-highest price ever paid for a U.S. residence. The home sits in a neighborhood that hosts “a Who’s Who of Silicon Valley tech and finance,” just ten miles from the third-most-expensive home in America, a manse in Los Altos Hills that last year sold for $100 million . . .

Johnson
All during World War II, to make sure that “a few do not gain from the sacrifices of many,” President Franklin Roosevelt insisted on a “steeply graduated excess-profits tax.” No such tax, notes national security analyst Walter Pincus, has been in place for the wars in Iraq and Afghanistan, and that absence has suited America’s defense industry just fine. Profits at America’s five top defense giants have soared 450 percent since 2002. One beneficiary: General Dynamics CEO Jay Johnson, a former admiral who joined GD a bit over 10 years ago. Johnson retired from his executive-suite stint last month. Details about his final year’s rewards haven’t yet surfaced. But we do know that Johnson pulled in $13.8 million in 2010 and $16.1 million more in 2011. At that year's end, Johnson held General Dynamics shares worth $41.3 million . . .

Still more proof that the recovery from the Great Recession has been a smashing success — for America’s most comfortable — has come from Scottsdale, Arizona. That city's annual Barrett-Jackson car collector auction has just collected $109 million, the same record take the auction registered in 2007, the last year before the recession hit. This year’s sale highlight: A Mercedes-Benz actor Clark Gable bought for $7,295 in 1955 — about $63,000 after adjusting for inflation — sold for $2.03 million. America’s 400 highest incomes in 1955 averaged, after federal taxes, just $846,000, about $7 million in today’s dollars. In 2009, the latest year with stats available, America’s top 400 averaged $162.1 million after taxes.

Quote of the Week

“Excessive inequality is corrosive to growth; it is corrosive to society. I believe that the economics profession and the policy community have downplayed inequality for too long.”
Christine Lagarde, International Monetary Fund managing director, Cut bankers’ pay or risk another crash,Independent, January 24, 2013

PETULANT PLUTOCRAT OF THE WEEK

Mickelson
Elite pro golfers today spend so much time hobnobbing with the rich that they've become, in effect, honorary plutocrats. Last weekend golf star Phil Mickelson did his best to sound like a real plutocrat. Mickelson hinted he might exit his home in California — and even the USA — now that rising tax rates have him paying “62, 63 percent” of his income in taxes. In fact, no American — even in California, with its 13.3 percent tax on income over $1 million — faces a tax bill anywhere near 62 percent. The top fed rate, 39.6 percent, applies just to income left after state taxes paid get deducted. Mickelson soon saw his error — and the ire of his average fans none too keen about wealthy whiners. He apologized, a move that left the Wall Street Journal fuming. Mickelson, the Journal pouted, had begun “a useful conversation” about how “confiscatory tax rates discourage productive effort.” Like hitting golf balls.


IMAGES OF INEQUALITY

Billboard-07

Larry Chait, for the Billboard Project

Web Gem

Happy Days Are Here Again/ Dave Kannerstein recorded the music for this jaunty protest against inequality with the Dukes of Destiny blues/rock band back in the 1990s. Last year, inspired by the Occupy movement, friend Lou Bransdorfer added video, creating in the process an Occupy anthem.

PROGRESS AND PROMISE

Robin-hood3
European Union finance ministers agreed last week to give 11 EU member nations, including Germany and France, the okay to levy a “financial transaction tax.” The tax rate will likely run 0.1 percent on stock and bond trades and 0.01 percent on exotic financial “derivatives.” This new levy will both raisesubstantial revenue and discourage the reckless speculative trading that pumps up grand fortunes. Wall Streeters still vigorously oppose any financial transactions levy. But two U.S. lawmakers last week said they'll be pushing legislation that would give taxes on financial trades a foot in the door. For activists globally, last week's EU action represents a “giant victory.” As the Robin Hood Tax drive puts it: “This. Is. Huge.”

Take Action 
on Inequality

Link up with the Robin Hood Tax campaign and see what you can do to grow the pressure for taxing financial trading.

INEQUALITY BY THE NUMBERS

Stat of the Week

America’s top 0.1 percent of income earners have seen their take-home nearly quadruple over the last three decades, the Economic Policy Institute reports. After adjusting for inflation, average top 0.1 percent earnings rose from $569,521 in 1979 to $2,158,892 in 2011. These totals don’t include income from capital gains and other investments.

IN FOCUS

To End Extreme Poverty, End Extreme Wealth

The world's wealthy gathered in the Alps again last week to discuss how to 'solve' the world's problems. The world's biggest problem, suggests one top global anti-poverty outfit, may be their fortunes.

Apologists for inequality have a standard retort to anyone who calls for a more equal distribution of the world’s treasure. If you took all the wealth of the wealthy and divvied it up equally among all the poor, the retort goes, no one would gain nearly enough to accomplish much of anything.

Oxfam International, one of the world’s premiere anti-poverty charitable organizations, would beg to differ. The world’s top 100 billionaires now hold so much wealth, says a new Oxfam report, that just the increase in their net worth last year would be “enough to make extreme poverty history four times over.”

“Oxfam's mission is to work with others to end poverty,” Oxfam analyst Emma Seery noted last week. “But in a world with limited resources, this is no longer possible without an end to extreme wealth.”

Oxfam timed its new analysis, The cost of inequality: how wealth and income extremes hurt us all, to appear right on the eve of last week’s World Economic Forum in Davos, Switzerland. This earnest “issues” confab annually brings together a glittering array of global business and political leaders.

The world’s corporate and financial elites began this January trek into the Alps back in 1971. But the Davos sessions really didn’t start grabbing big-time global media attention until the go-go 1990s.

“Throughout the boom years,” as a UK Guardian profile last week noted, “chief executives would gather every winter high up in the Swiss Alps to discuss in a lordly fashion the world economy and how it could be revised to suit their objectives and views.”

But in these days of deep global economic uncertainty, the power suits that frequent Davos have lost their mojo — and even feel pressured to address the global economic inequality they've so long tried to sweep under the rug.

That pressure last week came from figures like Christine Lagarde, the former French finance minister who now directs the International Monetary Fund. Lagarde blasted outsized executive pay in high finance, attacked bankers for lobbying against new regulation, and called for more “robust social safety nets.”

Oxfam, for its part, is calling for much bolder steps to narrow the stunning gap between the global uber rich and everyone else. The group is urging world leaders to “commit to reducing inequality to at least 1990 levels.”

Meeting that goal, the new Oxfam report relates, would require a wide range of measures, everything from far more steeply graduated income tax rates to actual pay caps that limit how much corporate executives can take home to a multiple of what the lowest-paid workers in the firms they run are making.

Oxfam is also emphasizing the importance of cracking down on offshore tax havens. As much as a quarter of global wealth now sits shielded offshore.

But don’t hold your breath waiting for the Davos crowd to buy into any of this bolder agenda. Even the modest reforms that the IMF's Lagarde urged last week found no wide support among the corporate and banking movers and shakers who ambled up to the Alps for this year’s Davos gathering.

One American on hand for the 2013 Davos festivities, JPMorgan Chase chief exec Jamie Dimon, made no move to hide his distaste for reformers. Bank regulators, he charged, were “trying to do too much, too fast” — and spreading “huge misinformation” about the noble work underway at banks like his.

“We’re doing the right thing,” Dimon assured his fellow Davos notables.

Other global corporate notables at Davos sang a similar tune. Azim Premji, the chairman of the Bangalore-based Indian high-tech giant Wipro, admitted that the new Oxfam data — on how the richest 100 people in the world are earning much more than enough to end the world’s worst poverty — do “sadden” him.

But Premji declined in an interview to term the incredible concentration of the world's wealth in any way “unethical.” We need not waste time, he suggested, worrying about “redistribution.” We need instead to help the rich grasp their “obligation,” their “trusteeship responsibility,” to wield their wealth for good.

Trust the rich, in other words, to solve our problems.

Not on your life, says Oxfam.

“In a world where even basic resources such as land and water are increasingly scarce,” Oxfam's Jeremy Hobbs sums up, “we cannot afford to concentrate assets in the hands of a few and leave the many to struggle over what's left.”


New Wisdom
on Wealth

Timothy Noah, The Equality InauguralNew Republic, January 21, 2013. President Obama's “second inaugural speech can be read as a sort of pledge that he’ll do better on the equality front during his second term.”

Sarah Anderson, Obama 2.0: Yes We Can Raise TaxesHuffington Post, January 22, 2013. Four live-wire opportunities for raising taxes on America’s most affluent.

Wallace Turbeville, Big Banks and Income DisparityPolicy Shop, January 22, 2013. A former Goldman Sachs banker explains why confronting high finance has become essential to reducing inequality.

Janet McFarland, Storming the boardroom: Sound, fury and little elseGlobe and Mail, January 23 2013. Trying to reform CEO pay via shareholder activism, says a veteran shareholder activist, isn't working.

Jim Tankersley, Yes, the middle class really is falling behindWashington Post, January 24, 2013. A counter to the new conservative pitch that average Americans are doing just fine.

Would your book club or community group or local university like to hear fromToo Much editor Sam Pizzigati on his new bookThe Rich Don't Always Win? You can now propose a book talk event on Togather, the new online crowdsourcing sitefor readers and authors.

NEW AND NOTABLE

An Unsung Service from Social Security

Epi2
Lawrence Mishel and Nicholas Finio, Earnings of the top 1.0 percent rebound strongly in the recovery, Economic Policy Institute Issue Brief, January 23, 2013.

And you thought the Social Security Administration only sends out checks! Social Security records — the wage and salary data employers report — have become a prime source of data on rising U.S. income inequality, and Economic Policy Institute researchers have just published an analysis of Social Security's latest payroll numbers. Top 1 percent earnings did dip during the 2007-2009 downturn, the analysis shows. But top 1 percent earnings have since “rebounded rapidly,” up 8.2 percent from 2009 to 2011, after inflation. In that same span, earnings for America’s bottom 90 percent dropped 1.2 percent.


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