May 14, 2007
The world's 950 billionaires today hold, collectively, about $3.5 trillion in assets. Last week, in a Time essay entitled Why We Should Share the Wealth, Columbia University economist Jeffrey Sachs imagined that $3.5 trillion pooled into a single foundation endowment, a stash that would yield about $175 billion a year for good works.
Such a sum, says Sachs, would be enough "to extend basic health care to all in the poorest world; end massive pandemics of AIDS, TB and malaria; jump-start an African Green Revolution; end the digital divide; and address the crying need for safe drinking water for 1 billion people."
"In short," notes Sachs, "this billionaires' foundation would be enough to end extreme poverty itself."
Extreme poverty, of course, shows no sign of disappearing. Extreme wealth keeps getting in the way. Not everyone, to be sure, sees things that way. In this week's Too Much, we take a look at a world leader who has argued, over his decade in power, that grand concentrations of private wealth should simply not concern us.
The U.S. auto industry may be awash in plant closings, layoffs, and health benefit cuts, but top auto execs are commanding higher pay than ever before. Indeed, the Detroit Free-Press reports, auto executive pay overall last year jumped 22 percent. Leading the pack: Ford CEO Alan Mulally, with $39.1 million in take-home. Almost half of that, $18.5 million, came as a bonus to get Mulally to exit his former job at Boeing. Ford lost $12.6 billion last year. GM CEO Rick Wagoner saw his pay jump 75 percent in 2006. GM, for the year, only lost $2 billion . . .
This July will mark the tenth anniversary of the “handover” that gave mainland China control over Hong Kong, and the celebrations figure to be lavish. Hong Kong’s financial elites couldn’t be happier with how things have worked out. Hong Kong now boasts more billionaires per capita than any political jurisdiction on Earth, and, this past January, the right-wing Heritage Foundation in Washington, D.C. labeled the enclave “the world's freest economy.” Hong Kong's wealthiest currently face a top tax rate on income that runs a mere 15 percent, and corporations have little in the way of government regulation to worry about. Outside Hong Kong's corporate suites, by contrast, worries abound. Air pollution over Hong Kong has grown so bad that people with asthma and cardiovascular disease last year had to stay indoors for neatly six weeks. And the share of Hong Kong families living in poverty, on less than $767 per month, has nearly doubled, since 1997, to 22 percent . . .
Meanwhile, over on the Chinese mainland, the mayor of Beijing is urging the city’s billboard industry to start showing a little restraint. Billboards touting luxury cars and villas, the Xinhua news agency notes, now appear on nearly every major Beijing street, “constantly reminding people of the yawning income gap between the rich and the poor.” And that, charges Mayor Wang Qishan, makes for a climate “not conducive to harmony in the capital.” The billboards apparently pose more than a mental health danger. Ad companies, in their haste to reach China’s new rich, have cut corners on billboard construction quality. Several huge billboards, Xinhua reports, have collapsed in high winds and killed unwary passers-by . . .
Become a rock star, in today's world, and you can punch your ticket to fortune. Or, if you’re Jello Biafra, you can gain a platform — and 
challenge top-heavy distributions of income and wealth. The 48-year-old Biafra, the stage name of Eric Reed Boucher, first won fame in the 1970s as the “punk rock prototype.” His band, the Dead Kennedys, broke up in 1986, but Biafra has remained active on the recording and lecture scene ever since. Biafra's recent spoken word albums, the Miami New Times notes, “are brimming with incisive moral commentary.” Among his themes: the need for a “maximum wage,” a cap on income. Explains Biafra, in a New Times interview published last week: “What causes more of a problem for this country, drug addiction or wealth addiction? Even in South Florida, I do believe wealth addiction is the answer.”
How generous are America’s most generously rewarded? Not nearly generous enough, says a new network of philanthropists who call themselves the “50% League.” The League’s four score backers have each given away at least “half or more of their net worth, their business profits, or their income for three years or more.” Most wealthy households in the United States don’t come anywhere near that level of charitable giving. In fact, researchers point out, if America’s wealthiest gave away the same share of their assets as low- and middle-income families, charitable contributions in the United States would increase by over $25 billion a year. The League, a project of the Zing Foundation’s Bolder Giving Initiative, is hoping to inspire all Americans to give “at their full potential.” The group’s activists range from the sister of billionaire Warren Buffett to a journalist who married into a Wall Street fortune.
Quote of the Week
“A society that does not have a reasonable and balanced distribution of wealth — one class with extravagant wealth and, simultaneously, many classes plagued by poverty — will be a society with unrest. It's a society with tensions, bitterness, and anger, all of which provide a source for violence.”
Israeli Defense Minister Amir Peretz, YNet News, May 9, 2007
New Wisdom
on Wealth
Charles Morris, Trick or trickle? As U.S. richest get richer, family income share drops. Commonweal, May 7, 2007.
Behind the Buyouts. A new Web site, hosted by the Service Employees union, that explores the impact of private equity wheeling and dealing on “workers, communities, and the nation.”
Tony Blair, the British Labor Party prime minister, last week announced he’ll step down next month after ten years in office, a decade that has fundamentally changed his nation — and his party.
Before Tony Blair, Labor Party leaders had typically preached a polite “class struggle” politics. These leaders, in office and out, stressed the importance of equality — and taxing the rich to help achieve it.
Tony Blair broke with that Labor Party past. He came to office as the apostle of what he called “New Labor.” Blair aggressively, and disdainfully, dismissed apprehensions about the wealth of the wealthy as silly distractions.
“It's not a burning ambition for me,” as Blair at one point noted, “to make sure that David Beckham earns less money.”
Instead, Blair vowed, New Labor would usher in a grand new era of equal opportunity. Britain would become a “meritocracy” where any child, no matter how poor, could grow up to prosper.
Critics, a decade ago, labeled Blair’s vision nothing more than “a softer, kinder, less sleazy version of Thatcherism.” They charged that Blair — just like Margaret Thatcher, the prime minister who spent the 1980s ripping social safety nets — would end up only widening Britain’s social and economic divisions.
Those critics have proved right. By nearly every measure, Britain has moved backwards. The rich have become phenomenally richer, the poor remain socially excluded, and average Brits are racing on an economic treadmill that never seems to slow.
“Wealthy people in Britain have never had it so good,” Britain’s most prestigious newspaper, the Times of London, pronounced last month. “The past decade of Labor government under Tony Blair has proved a golden age for the rich, rarely seen in modern British history.”
In 1997, Britain’s wealthiest 1,000 held a combined net worth of £99 billion, or nearly $200 billion. Over the Blair decade, the Times reports, that wealth has almost tripled, to £261.
At the other end of the economic ladder, the British Institute for Fiscal Studies reported this past March, the number of British children living in poverty is actually now rising, despite the Blair government’s profusely publicized child benefit, tax credit, and trust fund programs.
The government, researchers add, would have to commit another $8 billion a year to anti-poverty programs just “to stand a 50:50 chance of meeting its target of halving child poverty by 2010.”
That money may be hard to come by. The UK's biggest incomes now belong to billionaire foreigners who, thanks to gaping tax loopholes the Blair government shows no interest in plugging, pay hardly any tax at all.
These armies of foreign rich have bid up housing prices, and the trickle-down impact of those price hikes has left housing nearly unaffordable for millions of middle class families.
Amid all this, Britain’s prison population has, over the Blair years, jumped from “from 50,000 to 80,000, the highest in Europe.” Many of those jailed no doubt “merit” their fate. But do average Brits merit the society that a decade of rising wealth concentration has created?
Real equality of opportunity, New Statesman essayist Ruth Lister has noted, cannot be achievable in a “savagely unequal society.”
“Money begets money,” agrees British commentator Nick Cohen. “The rich pass on their wealth and its advantages to their children.”
“The greatest myth of the free-market right is that its policies allow the poorest child to go from rags to riches,” adds Cohen. “Socially mobile societies have very few people living in either rags or riches.”
Analysts like Cohen and Lister take their inspiration from one of the greatest of the English-speaking world’s thinkers, Sir Francis Bacon. Wealth is like manure, Bacon observed four centuries ago. It only does good when you spread it around.
Tony Blair never learned that lesson. The rest of us should.
More and more these days, in hip and savvy corporate marketing circles, the hip and savvy are talking “plutonomy.” Not familiar with the term? Join the club. Even some major online dictionaries haven’t yet picked up on this obscure formulation.
But corporate marketers have. They’re using plutonomy — a makeshift coupling of plutocracy and economy — to describe a society where a “superwealthy top band of super-earners and super-consumers” shape who the “free market” goes after and who the free market ignores.
And that’s a description, corporate marketing types agree, that now fits the United States.
Earlier this month, in Florida’s posh Palm Beach, about 250 of these marketers eager to profit off plutonomy gathered at an American Express “luxury summit” to soak up the latest research on America’s awesomely affluent.
That research, presented by the Connecticut-based Harrison Group, defines as merely “affluent” those American households that spend $10,000 to $20,000 a month on lifestyle, a level that consigns 95 percent of America’s households to less-than-affluent status.
The “super-affluent,” says the Harrison Group, take consumption up a notch. They spend $20,000 to $40,000 a month on lifestyle. Above them sit the purely “wealthy,” those households that lay out from $50,000 to $1 million a month on discretionary spending.
Another new survey, from a division of MarketResearch.com, uses “super-affluent” as the tag for the 2 million U.S. households — 1.2 percent of the nation’s household total — that take home over $250,000 a year.
This “super-affluent” cohort, says the survey, “wields even more leverage over the consumer economy” than the roughly 19 million households that make up the next richest 17 percent of American households.
The fortunes of America's richest households, the Harrison Group’s Jim Taylor told the American Express luxury summit, are compounding at a 20 percent annual rate.
“They can't possibly spend it,” quipped the marketing expert, “although God knows they're trying, and we thank the good Lord for that.”
Stat of the Week
A dozen major U.S. firms that together lost shareholders $330 billion from 2002 through 2006 shelled out more than $1.26 billion in CEO pay over the same period, says a new Corporate Library Pay for Failure study. Among the failing but forgiving companies: Dell, Eli Lilly, Pfizer, Time Warner, Verizon, and Wal-Mart.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
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