Millions without enough food and billionaires with more

Two reports were issued in recent days that make for a jarring, albeit not surprising, juxtaposition. One, the Forbes magazine annual list of the world’s richest people, was met with widespread breathless reporting. The other, a comprehensive survey of the large numbers of people who don’t have enough to eat in the United States, passed almost without a trace.

Because it merits far more attention than it received, let’s start with the second report. Issued by the Food Research and Action Center, the report “Food Hardship in America 2012” found that 18.2 percent of people living in the U.S. have insufficient access to food, based on the number of respondents who answered yes to the question: “Have there been times in the past twelve months when you did not have enough money to buy food that you or your family needed?”

That is close to one in five. Or, to put it another way, 57 million people in the United States — the richest country on Earth — face going hungry. In 20 states, representing all regions of the country, more than one in five do not have enough to eat. In a further irony, the U.S. metropolitan area with the highest level of reported hunger is Bakersfield, California, where 26.7 percent did not have enough to eat at some point in 2012. Bakersfield is located in California’s Central Valley, one of the country’s most productive agricultural regions.

The Food Research and Action Center also reports that more than 70 percent of people surveyed believed that the federal government should spend more money to alleviate hunger and 75 percent disagreed with congressional plans to cut food-assistance programs, already considered by experts as too small to provide adequate nutrition. These results are in strong contrast to the dominant narrative that cuts to social spending are widely desired.

One of the many corporate-media outlets that consistently cheerlead for more austerity is Forbes. The self-proclaimed “capitalist tool” proudly announced that 1,426 billionaires stride our planet, collectively accumulating net worths totaling US$5.4 trillion — $800 billion more than a year earlier.

To put that $5.4 trillion figure in perspective, there are exactly two countries in the world — the U.S. and China — that have a larger gross domestic product. The two largest economies in the European Union, Germany and France (according to World Bank statistics), have a combined GDP of US$5.5 trillion — barely more than the assets of the world’s 1,426 billionaires.

Mexican telecommunications magnate Carlos Slim Helu again tops the list of the world’s richest people, with $73 billion to call his own. And once again, the Walton family, airs to the Wal-Mart fortune, are well represented — four separate Waltons are among the top 17, worth a combined $107 billion. That fortune is built on a ruthless system of sweatshops in the countries with the lowest labor costs and weakest enforcement of labor laws, and a relentless exploitation of its workforce. Wal-Mart is notorious for handing new employees forms to apply for food stamps because its pay is too low for survival.

The unemployment rate in the European Union is currently at 11.9 percent and a disastrous 23.6 percent for people age 25 and younger. Inequality in incomes is on the rise in countries around the world. Stock markets are flirting with record highs, reflecting the financial industry’s giddiness that employees have ever lesser leverage to counter their deteriorating pay and work conditions. Employee wages have been stagnant for more than three decades despite large increases in productivity.

Isn’t there something wrong with this picture?

How could we have become so disconnected from the reality of our lives that we can celebrate the totality of all this as the greatest feat of humanity and a monument to efficiency?

Producing more but earning less around the world

We are working more and earning less. Productivity is up, but paychecks don’t keep pace. Average wages have been stagnant for four decades as the one percent has enjoyed spectacular gains in wealth.

The disproportion between increases in worker productivity and wages is perhaps most pronounced in the United States and Germany, but is common among the world’s advanced capitalist countries. This upward flow of income has long-term implications because the mass of wealth concentrated into few hands has led to an increase in destabilizing financial speculation — there are not enough opportunities for productive investment and consumer spending erodes because working people have less to spend.

In turn, reduced spending means there is little or no incentive for capitalists to invest, leading them to plow more money into speculation and to move production to newer low-wage havens because their profit margins are squeezed. Round and round the world has gone as the global economic crisis has persisted for half a decade with no end in sight.

The U.S. economy is still the world’s largest and is the model that its powerful capitalists work to export around the world; moreover, the massive U.S. trade deficit means the U.S. is to some extent propping up the world economy. Yet unemployment remains stubbornly high in the U.S. (even if lower than in the European Union). The U.S. economy simply isn’t creating jobs fast enough — that is the conclusion of a February 1 report issued by the Economic Policy Institute. The report, written by Heidi Shierholz, says:

“The U.S. labor market started 2013 with fewer jobs than it had 7 years ago in January 2006, even though the potential workforce has since grown by more than 8 million. The jobs deficit is so large that at January’s growth rate, it would take until 2021 to return to the pre-recession unemployment rate.”

Apologists for austerity as the “solution” to economic downturn often claim that the problem is a mismatch between the skills of job seekers and the skills needed by businesses. It is true that unemployment is lower among more educated people and higher among lesser educated people, but the rate of the increase in unemployment since the economic crisis began has been similar among all groups; in fact it is slightly higher among those with some college or a college degree than those with high school or less.

Among workers age 25 or older who are not high school graduates unemployment has risen 1.7 times since 2007, the Economic Policy Institute reports, while for college graduates it has risen 1.9 times. Among all workers, the rate of long-term unemployed has more than doubled during the past six years. The report says:

“The fact that we still have large numbers of long-term unemployed is unsurprising given that the ratio of unemployed workers to job openings has been 3-to-1 or greater since September 2008.”

Job growth lags behind GDP growth

The economies of the advanced capitalist countries simply aren’t growing fast enough to generate jobs. Because of competitive pressures that lead to layoffs, plant shutterings and moves to locations with much lower wages, and the increasing sophistication of computers and machinery, capitalist economies only increase employment during periods of robust growth, when demand requires more production. Unemployment ordinarily decreases only when an economy grows at least three percent annually.

Fred Magdoff and John Bellamy Foster, authors of the book What Every Environmentalist Needs to Know About Capitalism, summarized this conundrum:

“Capitalism is a system that constantly generates a reserve of unemployed workers. Full employment is a rarity that occurs only at very high rates of growth, which are correspondingly dangerous to ecological sustainability. As Christina Romer, former chair of President Obama’s Council of Economic Advisers, tells us, ‘We need 2.5 percent growth just to keep the unemployment rate where it is. … If you want to get it down quickly, you need substantially stronger growth than that.’ … [I]t is clear that if the GDP growth rate isn’t substantially greater than the increase in the working population, people lose jobs.” [pages 56-58]

As competition for jobs steadily becomes more acute, the dynamics of capitalism dictate that wages will be buffeted by strong downward pressures. Over the long term, not only the past few years, that has happened. A study published in the Spring 2012 edition of the International Productivity Monitor demonstrates the extraordinary mismatch between productivity gains and wages. The authors, Lawrence Mishel and Kar-Fai Gee, write:

“During the 1973 to 2011 period, the real median hourly wage in the United States increased 4.0 percent, yet labour productivity rose 80.4 percent. If the real median hourly wage had grown at the same rate as labour productivity, it would have been $27.87 in 2011 (2011 dollars), considerably more than the actual $16.07 (2011 dollars).” [page 31]

Almost every penny of the income generated by that extra work went into the pockets of high-level executives and financiers, not to the workers whose sweat produced it.

Around the world, workers see little of the gains

Workers in other advanced capitalist countries did not fare quite as badly, but the general pattern is there.

In Canada, for instance, labor productivity increased 37.4 percent for the period 1980 to 2005, while the median wage of full-time workers rose a total of 1.3 percent in inflation-adjusted dollars, according to a Fall 2008 report in the International Productivity Monitor. The authors of this report, Andrew Sharpe, Jean-François Arsenault and Peter Harrison, provided caveats as to the direct comparability of productivity and wage statistics, but find the mismatch to be real as labor’s share of Canadian gross domestic product has shrunk. The authors note that, in Canada, almost all income gains have gone to the top one percent. They write:

“If median real earnings had grown at the same rate as labour productivity, the median Canadian full-time full-year worker would have earned $56,826 in 2005, considerably more than the actual $41,401 (2005 dollars).” [page 16]

Wage erosion is also at work in Europe. Making a few calculations from International Labour Organization statistics on labor productivity and wages, provided for individual countries, I found that average real wages in Germany declined 0.5 percent per year for the period of 2000 to 2008 while German labor productivity increased 1.3 percent per year. (This was the only period for which I could find statistics for both categories.)

The prosperity of German manufacturers is built on the backs of German workers, who have absorbed a decade of pay cuts. Because the International Labour Organization uses average, rather than median, figures, the disparities are likely made to appear smaller than they might be because the wealthiest are increasing their share of income faster than anybody else, distorting the average. (“Average” is the halfway point between highest and lowest; an average will rise if the highest has risen while all others are stagnant. “Median” is the number representing someone at the 50th percentile, or the middle number if everybody was arranged in order, and thus is more representative.)

Using the ILO statistics, French workers’ average wages kept pace with productivity growth for the period 2000 to 2008 while Spanish workers lagged, earning 0.5 percent more in wages per year while productivity increased 0.9 percent per year. Income inequality has increased in France since the mid-1990s, an indication that growth in pay for the highest earners likely masks declines for most workers and therefore could account for the statistical stability in the French wage/productivity ratio.

By contrast, in Britain, a Resolution Foundation paper found a differential between productivity and wage gains, although smaller than that of the United States, but also that British workers did not lose as much ground as did French, German, Italian and Japanese workers. That conclusion is based on a finding that the share of gross domestic product going to wages in those countries has steeply declined since the mid-1970s.

What we have is a structural problem, not a problem confined to a particular country, caused by a government nor solvable by adopting a specific monetary policy. Nor is personal greed the underlying cause, regardless of the personal qualities of individual capitalists.

Intensified competition over private profits, and that “markets” should determine social outcomes, inexorably leads to a consolidation in which industries are dominated by a handful of giant corporations, and those corporations gain decisive power over governments and relentlessly reduce overhead (especially wages and benefits) in a scramble for survival. More inequality means less pay for employees, reducing demand and weakening economies, which leads to more unemployment and less leverage for employees in wage negotiations as corporations use any means necessary to maintain their profit margins.

That a new boom or bubble might occur in the future does not alter the overall picture; such a development would only be a temporary blip. If it is the structure that is the problem, then only a different structure can be the solution.

Quietly, the IMF confesses that austerity does not work

Don’t say it too loudly, because it doesn’t want you to know: The International Monetary Fund admits that austerity is not working.

The IMF of course did not come out and say this directly. But it was there, unmistakably, in its World Economic Outlook published on its web site on October 9. Forecasting the world economic growth rate to continue to decline, the IMF genteelly noted that:

“Public spending cutbacks and the still-weak financial system [are] weighing on prospects.”

And please don’t complain about the bureaucratically tepid language —  you didn’t expect an IMF official to call a press conference and apologize? No you didn’t. But that is as clear an admission as we are likely to get from the horse’s mouth that cutbacks, the magic snake oil that the IMF, World Bank and other financial institutions relentlessly impose, weakens economies.

For the record, the IMF projects 2012 growth in the world’s advanced capitalist countries will be 3.3 percent and forecasts growth of 3.6 percent for 2013, both slower than 2010 or 2011. It predicts a similar rate of decline in growth among the world’s developing countries. But let’s take note of two passages in the outlook.

“The IMF said that its forecast rested on two crucial policy assumptions—that European policymakers get the euro area crisis under control and that policymakers in the United States take action [to] tackle the “fiscal cliff” and do not allow automatic tax increases and spending cuts to take effect. Failure to act on either issue would make growth prospects far worse.”

The “fiscal cliff” is the congressional agreement made earlier this year that, barring superseding action by the U.S. Congress and president, a series of steep automatic cuts to federal-government spending kicks in at the end of the year — austerity imposed by one’s own von Neumann machine. Concurrently, the IMF believes that government investment is not necessarily a bad thing:

“The main driver [of growth in Asia] will be China, where activity is expected to receive a boost from accelerated approval of public infrastructure projects.”

So why do central bankers, financiers and multi-national financial institutions still preach austerity? Ideology, surely, plus arrogance and a lack of ability to admit the wisdom of financial elites is wrong. Nonetheless, at bottom such people are carrying out their class interests. If we had a different, more egalitarian economic system, and somebody came along and said, “Let’s immiserate entire countries so that a handful of financiers could remain fabulously wealthy by guaranteeing their profits” you would see the idea as insane. And it is.

There was one other tidbit — it seems that governments applying austerity programs over-estimated the savings to be accrued from them. The IMF said a common figure used by governments was to assume that for each dollar lost in government spending, 50 cents is erased from gross domestic product, an assumption used when creating austerity budgets. But, the fund said, its study of the issue has found that, since the economic collapse that began in 2008, for each dollar cut from government spending, GDP is reduced from 90 cents to $1.70.

In other words, the result of austerity is that it has accelerated economic contraction. A commentary on the Naked Capitalism web site written by a financial-industry professional caustically sums up what that re-calculation means:

“In case you missed it, this is an admission of complete and utter incompetence.”

IMF officials probably won’t be calling a press conference to admit that, either. The results of austerity across Europe has been devastating:

• 25 percent unemployment in Spain.
• 15 percent economic contraction in Ireland.
• Population exodus out of Lithuania and Latvia.
• 40 percent wage cuts and 22 percent economic contraction in Greece.

Unemployment has risen and wages reduced in the advanced capitalist countries. Demand is inevitably soft because of that — a vicious circle when 60 to 70 percent of economic activity is accounted for by consumer spending. Each country would like to get out of this impasse by exporting more, but the slowdown in economic growth has not spared any corner of the world. And although some countries might export more than they import, it is a zero-sum game — every country can’t be a net exporter.

One way to boost exports is to devalue your currency, but, here again, every country can’t devalue in relation to all others. China, Japan, Switzerland and the United States each has intervened in foreign-exchange markets in order to devalue their currencies (this is done through large-scale trading, not administrative fiat), but these actions can only go so far.

A critical problem for countries like Greece and Spain is that they don’t have their own currency, so, for them, the euro is over-valued. When imbalances force devaluation on a country, some of that devaluation can be achieved when its currency declines in value against others. But for users of the euro, all the devaluation has to come internally, through wage reductions, government spending cuts and destruction of capital values. Capitalism is a system of relentless competition in which only so many can be winners.

That competition tends to be seen through national lens; thus the form in Europe has been German bankers and politicians wagging disapproving fingers at Mediterranean neighbors. That distorted vision obscures the fact that it is only German industrialists and financiers who have benefitted; German workers have endured a decade of declining wages. And now that austerity has been relentlessly imposed in its eurozone customers, a decline in exports can’t be made up by internal demand thanks to those declining wages.

Eventually, austerity bites back — the IMF forecasts the composite eurozone economy to contract this year and increase by 0.2 percent in 2013, and Germany to grow by a mere 0.9 percent this year and next after posting four percent growth as recently as 2010. The German government has kept dissent down by acknowledging the sacrifices made by German workers, a point made repeatedly by the country’s mass media in the context of whipping up national feelings and directing those feelings against “profligate” countries on the eurozone’s southern rim.

It was thus a promising sign that the leader of Die Linke (the German Left Party), Bernd Riexinger, attended the October 9 demonstrations in Athens with Alexis Tsipras, the leader of Greece’s main Left opposition coalition, Syriza. Austerity is a cross-national offensive by financiers and industrialists to maintain their power and wealth at all costs. The response to austerity can only be cross-national. Capital does not care about borders and nations; similarly, working people can only reverse the devastating attacks on them through linking hands across borders.

 

It’s not only jobs that are off-shored; the profits are as well

By Pete Dolack

There’s no money! Cut, cut, cut! So go the mantras of austerity. The second exclamation follows on the first, but the first is not so. Where then is the money?

Much of the money is hiding in tax havens; both corporations and the top executives and financiers who rake in fabulous wealth on the backs of the employees of the enterprises they control make full use of such havens. U.S. elites are encouraged to do this is because U.S. tax law, through mind-numbing complexity, allows profits and income to be shifted offshore, where they remain untaxed.

Such accounting legerdemain is openly acknowledged (although the details and scale are always hidden), and most often justified by another oft-repeated mantra: That U.S. tax rates are simply too high. But a simple lesson in history demonstrates that is not so, either.

The highest personal tax rate was 91 percent during the 1950s and early 1960s. The latter decades were not periods of U.S. economic hardship, nor did the wealthy by and large fail to remain wealthy. But as neoliberal ideology became dominant, those tax rates fell sharply — from 70 percent at the start of Ronald Reagan’s two presidential terms to 28 percent by the time he was done.

Today, the top tax rate in the U.S. is 35 percent in the wake of several adjustments. The top corporate tax rate is the same. Millionaires, however, don’t pay anywhere near that rate, nor do corporations, because there are so many generous loopholes, making the Right-wing argument that the U.S. corporate tax rate is among the world’s highest specious. (And most of the wealthy’s income derives from capital gains, which are taxed at only 15 percent.) Just how little many economic elites actually pay in taxes was revealed again in an interesting study released earlier this month by the Institute for Policy Studies.

The report found that:

• In 2011, for the second year in a row, 25 of the 100 highest-paid corporate chief executive officers in the U.S. took home more in pay than their company paid in federal income taxes. On average, the 25 firms had nearly $1 billion in U.S. pre-tax income but still received net tax benefits that averaged $129 million.
• The chief executive officers of these 25 firms received $20.6 million in average total compensation last year. Combined, the 25 firms have 533 subsidiaries in tax-haven locations such as the Cayman Islands, Bermuda and Gibraltar.
• The four most direct tax subsidies for excessive executive pay cost taxpayers an overall estimated $14.4 billion per year. That amount could cover the annual cost of hiring about 212,000 elementary-school teachers or Head Start slots for about 1.9 million pre-school children for one year.

The Institute for Policy Studies report states that:

“Nationwide, budget cuts have axed 627,000 public service jobs since June 2009, all but 6 percent of that total at the state and local level. Schools, health clinics, fire stations, parks, and recreation facilities—virtually no public service has gone unsqueezed. … Yet tens of billions of these scarce tax dollars are getting diverted. These tax dollars are flowing from average Americans who depend on public services to the kingpins of America’s private sector. They’re subsidizing, directly and indirectly, the mega-million paychecks that go to the top executives at our nation’s biggest banks and corporations.”

One of the ways that working people subsidize stratospheric executive pay is a loophole that allows unlimited compensation to be deducted from a corporation’s tax bill — the more outlandish the executive pay, the less a corporation owes in taxes.

The massive tax cuts for the wealthiest put through by the Bush II/Cheney administration is often cited as a leading reason for the yawning deficits that opened up during the decade of the 2000s. The wealthiest certainly benefited, as the Institute for Policy Studies report demonstrates: Fifty-seven chief executive officers alone saved a composite $104 million, or $1.8 million per CEO, as a result of the Bush tax cuts.

U.S. economic elites are not unique, and there are many more than 57 people enjoying massive benefits from tax cuts, subsidies, tax havens and tax shelters. A July 2012 Tax Justice Network report found that:

“A significant fraction of global private financial wealth — by our estimates, at least $21 to $32 trillion as of 2010 — has been invested virtually tax-free through the world’s still-expanding black hole of more than 80 ‘offshore’ secrecy jurisdictions. We believe this range to be conservative.”

That is a whole lot of wealth not being taxed. And while most of that total is accumulated by the wealthiest in the advanced capitalist countries, much of it comes from elites in other countries. The Tax Justice Network studied 139 middle- and low-income countries for which it had sufficient World Bank data and found that:

“Since the 1970s, with eager (and often aggressive and illegal) assistance from the international private banking industry, it appears that private elites in this sub-group of 139 countries had accumulated $7.3 to $9.3 trillion of unrecorded offshore wealth in 2010, conservatively estimated, even while many of their public sectors were borrowing themselves into bankruptcy, enduring agonizing ‘structural adjustment’ and low growth, and holding fire sales of public assets.”

Within the United States, Citizens for Tax Justice reports that:

“Tax evasion by individual taxpayers is estimated to deprive the U.S. Treasury of as much as $70 billion per year (corporate offshore tax avoidance is estimated to cost the Treasury an additional $90 billion per year).”

The U.S. government budget deficit is much larger than $160 billion per year, but the total in the above paragraph is only an estimate of shell games performed with off-shore tax havens. Add in tax loopholes, accounting gimmicks and assorted other ways to avoid paying tax on income and profits, and the numbers begin to add up.

The wealthy would much rather loan money than pay taxes. They would like more money to flow to them. But extreme inequality leads to hard times and a vicious circle — more austerity is imposed, reducing the amount of money in the hands of working people, causing them to spend less due to fear of the future, which leads to more weakness in the economy. (No small factor when consumer spending constitutes 60 to 70 percent of the gross domestic product of advanced capitalist countries.)

As more money and capital is concentrated into fewer hands, and the ability to move jobs and production is more unfettered, more power is concentrated in the hands of economic elites, giving them a greater ability to have their preferred policies adopted by governments.

The cycle of austerity can be summarized in two paragraphs: Governments borrow money from the rich and from corporations instead of taxing them, then have to pay higher interest rates on those borrowings because the rich and the corporations complain that too much is being borrowed. To ameliorate the demand for higher interest rates, the governments’ central banks are lending money nearly interest-free to financial institutions so that they will continue to buy the governments’ loans at the higher interest rates. In exchange for continuing to buy government debt (which will earn them a nice profit because they are using the cheap money to buy the debt), the financial institutions demand that the governments cut social services, lay off workers, sell assets and impose other austerity measures.

As a result of the austerity, governments take in less revenue, so they have to borrow more from the rich and corporations, who have hoarded the country’s wealth, at the same time the governments’ central banks are giving financial institutions more cheap money and giving them the green light to hand out more money to insiders, leaving them more vulnerable to the next economic downturn, when, because they are “too big to fail,” they are confident they will receive another bailout.

The standard ideological obfuscation used to justify ever lower tax rates on the wealthy is a variation of “you can decide what to do with your money better than government”; a subset of this is that higher taxes on the wealthy are meant to “punish” them. But social services — schools, transportation infrastructure, court systems, police, fire departments, unemployment insurance and much else — cost money, and a civilized society has to pay for them.

Moreover, the successful businessperson, whether he or she inherited the business or led the building of it, benefits enormously from the society that enables them to amass their wealth. The line of “you can decide what to do with your money better than government” is seductive: Of course you should make your own choices. But that’s not what taxes are — they are not a “taking away” of an individual’s autonomy, they are the price we all pay to live in a civilized country.

The plutocrat making that argument is not concerned about his or her employees’ autonomy; only about his or her ability to slake his or her greed. But the problem with greed is that it can never satisfied; more is never enough.

Nor do plutocrats “create” jobs —  they are created by a need to fulfill demand. More jobs mean more employees to profit from because profits are derived from the work of employees.

“Freedom” is equated with individualism — but as a specific form of individualism that is shorn of responsibility. More wealth for the rich is advertised as good for everybody despite the shredding of social safety nets that accompanies the concentration of wealth. Those who have the most — obtained at the expense of those with far less — have no responsibility to the society that enabled them to amass such wealth. Imposing harsher working conditions is another aspect of this individualistic “freedom,” but freedom for who?

“Freedom” for industrialists and financiers is freedom to rule over, control and exploit others; “justice” is the unfettered ability to enjoy this freedom, a justice reflected in legal structures. Working people are “free” to compete in a race to the bottom set up by capitalists — this is the freedom loftily extolled by the corporate media and the institutions of the wealthy.

As I have previously noted, the economist Richard Wolff, in his Economic Update radio show, points out that if only U.S. residents with at least $1 million at their disposal for investment were taxed 10 percent on this portion of their wealth — their fixed assets such as mansions, yachts and collectibles such as works of art would remain untouched — the entire yearly U.S. government budget deficit would be eliminated.

There is enough to go around — if there is enough collective will and organization to make it happen.

The world’s richest 22 people own more than Switzerland produces

By Pete Dolack

The wealthy are wealthy because they work harder than you: So goes a favorite parable. Many wealthy people undoubtedly do work hard; at least those who amassed it themselves rather than inheriting it.

But is it really possible that 22 people could work harder than the entire population of Poland? Or Switzerland?

It safe to assume there are millions of Poles and Swiss who work diligently at their jobs. Yet the gross domestic products of Poland, Switzerland and most other countries of the world is smaller than the wealth amassed by 22 people.

The top of an extraordinarily steep pyramid is in the stratosphere. There are 22 people in the world who possess US$20 billion or more of assets, according to the 2012 edition of Forbes magazine’s annual list of the world’s billionaires. Those 22 people have a combined total of $675 billion in assets. You read that correctly: two-thirds of a trillion U.S. dollars. There are only 18 countries in the world with a gross domestic product of more than $675 billion, according to World Bank calculations.

So, yes, 22 people have more than is produced by the entire country of Switzerland — one of the world’s richest countries — and more than the 38 million people of Poland, one of the European Union’s biggest countries.

The corollary of the wealthy supposedly working harder than the rest of us is that they really don’t have that much, and taxing them would be useless in terms of reducing government deficits. When we peer into the numbers, however, that mantra has no more basis in reality than the idea that 22 people work harder than entire countries or that U.S. chief executive officers work 340 times harder than their employees.

The “World Wealth Report 2012” just issued by consultancy Capgemini and Royal Bank of Canada, intended for financial-industry professionals, contains some interesting facts about the people the financial industry reverently calls “high net worth individuals.” These fortunate folks are those with at least US$1 million at their disposal for investment — a sum that does not include the value of personal assets and property such as primary residences, collectibles and consumer durables. (Therefore, this report does not include all accumulated wealth, as the Forbes list does.)

What do we find? That there are 11 million people in the world who qualify as a “high net worth individual” and these 11 million people have a combined investable wealth of US$42 trillion. Because it is impossible to imagine a number that large, think of it this way: That total is equal to two-thirds of the world’s gross domestic product. Those 11 million people represent not the one percent, but the top 0.16 percent of Earth’s population.

Let’s tease out one more number from the Capgemini report. In the United States and Canada, there are 3.4 million “high net worth individuals” — quite close to constituting North America’s one percent — and they have disposal income for investment totaling US$11.4 trillion. The economist Richard Wolff, in his Economic Update radio show, points out that if only these people were taxed 10 percent for this portion of their wealth — their fixed assets such as mansions, yachts and collectibles such as works of art would remain untouched — the entire yearly U.S. government budget deficit would be eliminated.

There is nothing unique about the U.S. A British economist, Michael Roberts, writes that the wealth of the 1,000 richest people in Britain has increased by £315 billion in just the past 15 years, and taxing only those gains at Britain’s capital-gains tax rate of 28 percent would cover 70 percent of the government’s total deficit.

As has been noted before, such people would prefer to loan governments money, with interest, rather than pay taxes. And then they complain that the government is borrowing too much and demand austerity be imposed. Theoretically, they could use their accumulations of wealth for productive investment, which would at least create jobs. But, thanks to austerity — and the high unemployment and reduced wages that result from it — demand is stagnant. If there is too much productive capacity and/or corporations can’t sell the products they already produce, then there is no economic rationale to invest in new production. Thus U.S. corporations are sitting on $2 trillion of cash and the wealthy pour their immense income into speculation because they have more than they can possibly spend, there being too few investment opportunities, and speculation is more profitable than production.

When too much money is chasing too few assets, a financial bubble inflates. But the bubble always bursts. And the bigger the bubble, the bigger the fall.

When the bubble bursts, the banks are bailed out and the rest of us are sold out, as the saying goes. The net result is a still greater concentration of wealth and more people pushed into or toward poverty, forced to rely on government assistance. But that puts more strain on governments, which become more reliant on the wealthy to loan them money, more desperate to give corporations giveaways in the hopes of a few more jobs being created locally, and progressively weaker in relation to corporations. Corporate dominance intensifies, and executives and speculators are able to increase the wealth they extract from the corporations they control and reduce their tax bills. Round and round it goes until a mass movement reverses a downward spiral.

Just what is it that the wealthy do to accumulate so much? Let’s return to the tip of the tip of the pyramid: Those with $20 billion or more in total wealth. Eleven of the 22 who have accumulated this fantastic level of wealth are residents of the United States. Who do we find? Four members of the Walton family (heirs to the Wal-Mart fortune); the Koch brothers (who inherited their oil and gas empire from their father); a financial speculator who crashed more than one currency; two software moguls (taking advantage of a technology created by the U.S. government); an owner of casinos; and one highly successful investor, Warren Buffet.

Wal-Mart’s leading role in the race to the bottom is well documented. Wal-Mart is extraordinarily ruthless in cutting its costs — not uniquely bad, merely the company most efficient — and has done more than any other entity to cause production to be moved to Chinese sweatshops. Wal-Mart is a company notorious for its hatred of unions and pays so little that new employees are handed application forms for food stamps.

Taxpayers thus are subsidizing Wal-Mart’s profits; sweatshop workers are brutally exploited; jobs in advanced capitalist countries are eliminated; and communities ravaged as local mom-and-pop businesses are forced to shutter. In all these ways, more money is funneled upward into the Wal-Mart central office, and away from local communities. That is how the Walton family accumulated its fantastic wealth — the four members are each individually among the richest 11 people in the U.S.

The Koch brothers are becoming well known for their attempts to create an ideological monopoly within the United States. Their father was one of the leaders of the John Birch Society, an extremist group that was the “tea party” of the mid-20th century, going so far as to denounce Dwight Eisenhower as a “communist”! The sons have learned well, bankrolling the tea party movement of the extreme Right, funneling huge sums on money into a variety of extreme Right causes and institutions, funding libertarian ideology, and directing the policies of, among others, Wisconsin Governor Scott Walker and his anti-union, anti-government austerity program.

The two Koch brothers have $50 billion between them — so they can afford to donate millions of dollars to cultural organizations to “greenwash” their image without losing the ability to impose their agenda. Thanks to their lucky birth, they are tied for fourth place on the list of richest U.S. citizens, and they are going to make certain they are not dislodged.

Then we have Microsoft founder Bill Gates and Oracle founder Larry Ellison. We are supposed to believe that Silicon Valley moguls created vast wealth. They did — for themselves. But they did so by taking advantage of what others created. Amidst all the celebrations of newly minted computer billionaires, it is easy to forget none of it would have been possible without government research. The Internet is a creation of the U.S. Department of Defense, which had a strong interest in creating a decentralized means of communication that could not be knocked out at a stroke; many universities, including public universities, helped in the Internet’s creation; and the world wide web is a product of CERN, the European intergovernmental research institution.

Many other industries exist due to government funding — the Internet is merely one example of public investment converted into private profit. Microsoft was accidentally handed a monopoly on personal-computer operating software by International Business Machines before IBM had any inkling of how ubiquitous PCs would one day become, and Microsoft’s billionaires have cashed in by leveraging the company’s monopoly without innovating any products as mythology would have us believe.

Even Warren Buffet has profited nicely from financial legerdemain. He is the largest shareholder of one of the three main credit-rating agencies, Moody’s. Those agencies played a critical role in the housing bubble by giving sterling ratings to high-risk bundles of mortgages and other speculative financial products, and those agencies continue to play their role within the world of finance capital by repeatedly downgrading the ratings of governments, forcing higher payments of interest to the wealthy who loan money to governments instead of paying taxes.

The rest of the tip of the pyramid seem not so impressive compared to the tip of the tip, although we need not shed tears for them. Last October, the Swiss financial company Credit Suisse published its “Global Wealth Report 2011,” which also revealed interesting information. For instance, the world’s most wealthy one percent own 44 percent of the world’s wealth, while the bottom 50 percent collectively own one percent. Nor is the further concentration of wealth we have experienced since the rise of neoliberalism at the start of the 1980s in your imagination. Credit Suisse’s report states:

“Available evidence suggests that household wealth in mature economies was a fairly constant multiple of income for much of the 20th century until 1980, after which the wealth-income ratio has trended upwards. … Financial assets in [Group of Seven] countries also show little change relative to income up to 1985, when a regular pattern of growth began.”

In plain English, what the report is saying is that the accumulation of wealth by “high net worth individuals” is outstripping gains in income — wealth is becoming more concentrated. It takes money to make money, the old saying goes. And it is more effective than working.

David and Charles Koch can create a network of institutions and bankroll a national movement that promotes their business interests. Bill Gates, the Walton family and an allied billionaire can personally direct the thrust of education toward a narrow training in technical skills shorn of courses that teach independent thinking, and work to replace public schools with corporate-controlled “charter” schools. Their peers can fund an overwhelming bombardment of ideology to suit their elitist agenda.

Wouldn’t it be better for decisions in education and all the other fields important to the public be made by the public through democratic, accountable institutions? Wouldn’t democracy be better than plutocracy?