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| THIS WEEK | |
California has no money. California is swimming in wealth. Take your pick. California has no money. That’s what the politicians in Sacramento are saying. They’ve cut nearly two-thirds of a billion out of the state’s university system budget this year and upped tuition 18 percent. Last week college students across the state, backed by trade unionists and community activists, demanded that the state’s top 1 percent restore those cuts and “refund California.” The students and their allies marched and occupied. They even set up an encampment in a Bank of America lobby in downtown L.A. California, the protestors declared, has plenty of money. The protestors have a point. A new global financial study released last Wednesday revealed that California now hosts more “ultra high net-worth individuals” — deep pockets worth more than $30 million — than France, Italy, Spain, and Russia combined. We have lots more on these ultras — and our future — in this week’s Too Much. | |
| GREED AT A GLANCE | |
 The poll data just keep on coming. America, most Americans feel, has become much too unequal. The annual American Values Survey, released last Tuesday,shows “big agreement among all religious groups for leveling the economic playing field and taxing millionaires.” Among younger Americans, seven in tenbelieve “society would be better off if the distribution of wealth were more equal.” Two other surveys out last week carried the same message. In a Wall Street Journal/NBC News poll, 76 percent agreed that America’s economic structure “favors a very small proportion of the rich over the rest of the country.” In the latest Washington Post/ABC News poll, a 60 to 35 percent majority wants public policy to “to reduce the gap between wealthy and less well-off Americans.”  Spiraling paychecks have become an accepted fact of life throughout Corporate America's executive ranks, not just in CEO suites. Last year, says a new studyfrom Equilar, compensation for U.S. corporate COOs — chief operating officers — rose 30.1 percent. The Dodd-Frank reform legislation that passed Congress last year has several provisions designed to slow down America’s executive pay gravy train. What impact is Dodd-Frank so far having? Americans for Financial Reform has assembled a blue-ribbon panel to track the legislation’s progress at an upcoming December 12 conference in Washington, D.C. The Arab spring's egalitarian spirit is still spreading. The Egyptian stock exchange last week announced plans to cut senior executive pay by 20 to 40 percent. The exchange, Daily News Egypt reports, made the move “to keep up with recent socio-economic unrest.” Egypt continues to experience, a New Yorker dispatchrelates, “a constant white noise of strikes and protests.” The latest protest victory: a new “maximum wage” in Egypt’s national radio system. The current strike wave would ebb, notes the chief economist at one leading Cairo think tank, if authorities agreed to a higher minimum wage and a maximum set at 15 times that minimum. Ahmed El-Sayed El-Naggar of the Al-Ahram Center for Political and Strategic Studies says this pay restructuring would be “a major step towards achieving” the Egyptian revolution's social justice ethos. | |
| INEQUALITY BY THE NUMBERS | |
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| IN FOCUS | |
The Global Super-Rich Stash: Now $25 Trillion Still another financial firm has tallied how much net worth is sloshing in the pockets of the world’s most spectacularly wealthy. So when will the time finally come to stop the counting — and start the taxing? In today’s astoundingly unequal global economy, banks can go either of two routes — or both — to bag ever bigger returns. They can squeeze the 99 percent with nuisance fees and penalties. Or they can cater to the richest of the rich. But both routes have bumps. The 99 percent can squeeze back, as they did earlier this month when Americans by the tens of thousands shut down their Bank of America accounts to protest the bank’s $5 debit card greed grab. And the richest of the rich? To cater to these fortunates, you first have to find them. That can be difficult. Fortunately, financial industry consulting firms have stepped up to help. These firms have started publishing annual global wealth surveys that pinpoint where banks — and luxury retailers and anyone else who wants in on top 1 percent action — can find “high” and “ultra high” net-worth individuals. Last week, a new global firm — the Singapore-based Wealth-X — entered the global wealth survey fray, joining a crowded field that already includes Capgemini and Merrill Lynch, the Boston Consulting Group, Credit Suisse, and Deloitte LLP. Each of these firms has tried to carve out a unique market niche. The Wealth-X specialty? The world of the ultra rich, those individuals who can claim at least $30 million in net worth. And the researchers at Wealth-X haven’t just counted these ultras in their first annual global wealth census. They’ve tiered them. For the entire world — and major nations — Wealth-X teases out subsets of the super rich, from the $30-to-$50 million set to the $1 billion and up. For the first time, thanks to Wealth-X, we can compare the barely ultra with the comfortably ultra and those super ultras who can make the comfortables seem pinched. “Our report maps exactly where the biggest money is located,” Wealth-X CEO Mykolas Rambus boasted at a Geneva news conference last week, “and just how much there is.” The Wealth-X research answers “how many” as well. The firm counts 185,795 individuals worldwide with at least $30 million net worth. These ultra high net-worth individuals — UHNWs — hold $25 trillion in combined wealth. The global economy may be tottering, the new Wealth-X World Ultra Wealth Report 2011 goes on to inform us, but the “lifestyle habits of UHNW individuals have not been severely impacted.“ “Simply put,” the Wealth-X analyst team gushes, “the world’s wealthy elite are in a class of their own.” In that class, Americans pack a bunch of the rows. Of the near 186,000 global ultra rich, 57,860 — 30 percent — carry U.S. passports. These American ultras hold a combined net worth of $7.6 trillion, an average of $131.4 million each. That average masks a huge concentration of wealth at America’s summit. The 455 deep-pocketed Americans worth at least $1 billion hold half a trillion more in wealth than the 29,415 Americans in the Wealth-X $30-to-$50 million tier. These numbers need a bit more context to have any real meaning, and we can take a stab at providing that context by glancing over at the “super committee” deficit-reduction deliberations now underway in Washington, D.C. The 12 lawmakers on this congressional super committee — six Republicans and six Democrats — are trying to trim $1.2 trillion off federal red ink over the next ten years. On their chopping block: Medicare, Social Security, and assorted other programs essential to the well-being of America’s 99 percent. The super committee reporting-out deadline comes next week. No one knows how much budget-cutting pain the panel will be recommending. But panel members could actually avoid all that pain — and raise over $1 trillion in new money for investing in America — simply by subjecting all U.S. individual net worth over $30 million to a modest wealth tax. Our U.S. ultra wealthy, Wealth-X calculates, together hold almost $5.9 trillion over this $30 million threshold. An annual 5 percent wealth tax on this overage would raise over $293 billion a year, or $2.9 trillion over the next decade — more than double the $1.2 trillion the super committee is so desperately looking to find. The most amazing part of this? America’s ultra rich could easily pay this 5 percent annual wealth tax for the next ten years and remain as rich as ever. That’s because wealth begets wealth. All those trillions of dollars America’s ultras are currently holding don’t sit under some mattress. The ultra wealthy have those trillions invested in assets that generate short- and long-term returns. If America’s ultras averaged returns on those investments not that far above 5 percent over the next ten years, they could pay the wealth tax and still end the decade with higher personal net worths than when the decade began. Back in the 1990s, a public-spirited financial industry superstar — multimillionaire San Francisco money manager Claude Rosenberg — spent a sizeable chunk of his personal fortune campaigning to get a similar message across about the enormous wealth of the wealthy. Rosenberg’s particular point: America’s fabulously rich could hike their annual contributions to charity by tenfold and still end up with higher personal fortunes. Rosenberg started a research group dedicated to sharing this message and the analysis behind it. He wrote a book and peppered the periodicals that rich people read with op-eds that detailed his group's number crunching. In the year 2000, Rosenberg’s researchers would document, households with $1 million or more in income could have given $128 billion more to charity than they actually did in fact give, without losing any net worth over the course of the year. Claude Rosenberg died three years ago at age 80, his message to the super rich essentially totally ignored. The vast increase in charitable giving by the rich he had hoped to inspire never materialized. The message to the rest of us from Rosenberg’s noble effort? The excess wealth our ultra wealthy hold, if put to the public good, could change the trajectory of America’s future. The ultra wealthy don’t seem to be willing to do that putting on their own. With a few tweaks of our tax code, we could do that putting for them. | |
| IN REVIEW | |
A Consumer Society Unable to Consume Stewart Lansley, The Cost of Inequality: Three Decades of the Super-Rich and the Economy. Gibson Square, 2011. 320 pp. Plan B: A good economy for a good society. Edited by Howard Reed and Neal Lawson. Compass, London, October 31, 2011. 40 pp.
The quick answer: Inequality brought on the mess. Only more equality can clean it up. These answers a bit too flip for you? Then take a look at these two new important resources. Both arrive courtesy of progressives in the UK. Both speak to audiences far beyond Britain’s shores. Veteran economist and financial journalist Stewart Lansley completed the first of these, his just-released The Cost of Inequality, before the Occupy Wall Street movement burst out upon the global scene. But his new bookhas perfectly anticipated the movement’s basic “We are the 99 percent” motto. Our most fundamental global divide, Lansley writes, now rests “between a tiny group at the very top and nearly everyone else.” Other analysts have taken on the task of explaining what this divide means for our social health and well-being. Lansley turns his eye on what this divide has meant for our economy. He traces our last three decades of economic history — on both sides of the Atlantic — and explains just how excessive concentrations of income and wealth have led us into our current abyss. These concentrations have created a “consumer society without the capacity to consume” — and a variety of other pathways that link “inequality and economic malfunction.” Lansley introduces all these linkages in an op-ed published last month. The Cost of Inequality vividly extends and deepens this op-ed analysis. Lansley's new work belongs on every “people's library” shelf in an Occupy movement encampment. Your bookshelf, too.
Why a “Plan B”? The current British government’s “Plan A” — austerity cutbacks that the government contends will have the nation escaping economic downturn and disaster — is clearly not working. Yet prominent pols in the United States want to head down the exact same direction. The new Plan B from Compass — a plan already endorsed by 100 top progressive UK economists — sets forth “an alternative, not just to cuts, austerity, and stagnation, but to a return to business as usual and all that means for growing inequality, climate change, and people’s well-being.” Going beyond “business as usual,” Compass continues, demands a new paradigm that prioritizes “fairness over greed, the needs of productive capital over finance capital, the long term over the short, and the needs of people and the planet over the excessive and undeserved profits of a few.” This new Plan B spells out dozens of steps, both big and small, that can move today’s troubled economies towards this new paradigm. The entire “Plan B” now appears online. Plan B has already begun making political waves. A group of MPs in the UK's governing “Plan A” coalition have broken ranks to rally behind it. We really do need an epic transformation, they seem to agree, that creates an economy “in tune with the needs of people and the planet.” | |
Quote of the Week
“If we want a government of the people and by the people, you’d want 99 percent of the members of Congress coming from the 99 percent of society that's not worth $9 million.”
Derek Cressman, Common Cause regional director,California Watch, November 10, 2011. In fact, at least 11 percent of the members of Congress have net worths over $9 million, the threshold that brings top 1 percent status
Stat of the Week
Just how many Americans from the bottom 99 percent have made it into the top 1 percent over recent years? The Tax Foundation has some numbers. Between 1999 and 2007, only one tenth of 1 percent of Americans in the bottom 60 percent moved into the top 1 percent. Of the 20 percent of Americans right above that bottom 60 percent, only three tenths of 1 percent moved into the top 1 percent's rarefied air.
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George Monbiot, The 1% are the very best destroyers of wealth the world has ever seen,Guardian, November 7, 2011. Wall Streeters rake in massive windfalls “for doing no better than would a chimpanzee flipping a coin.”
Michael Lind, How the rich rig the system, Salon, November 9, 2011. Low capital gains taxes and stock buy-backs, just two of the many ways our elites ensure the markets work to their benefit.
Sam Pizzigati, Ideas from the 99 Percent: Equality Now! The Nation, November 14, 2011. The young men and women who launched Occupy Wall Street, the Too Much editor explains, "have overachieved magnificently.”
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