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 Buffett.
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 Buffett 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?