Too Much a commentary on excess and inequality

Too Much a commentary on excess and inequality

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February 2016

This Month

You want stats on how unequal our globe has become? We have plenty of them in this month’s Too Much. But we also offer something more as well. We offer some real hope for a more equal future.

That hope has emerged on multiple fronts. We have a battle for the White House that has shoved inequality — and what to do about it — front and center politically. And now we also have a stirring new declaration from nine top leaders of our global civil society.

These nine leaders hail from groups that range from Amnesty International and Oxfam to Greenpeace and the International Trade Union Confederation. They’ve all agreed to work together “to tackle the root causes of inequality” and confront “disparities of wealth and power.”

“We need change on a scale never seen before,” the civil society leaders boldly and simply state. “We choose to imagine a better world.”

At Too Much, we do, too.

 

About Too Much

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Images of Inequality

luxury-watch

Who says the super rich don’t appreciate transparency? Yes, these deep pockets may have $7.6 trillion hidden away in offshore tax havens, as the latest research tells us. But they’re only doing that hiding to save up to buy triumphs of transparency like the new Flying Tourbillon timepiece from Louis Vuitton. Designed for “people who enjoy the best that life can offer,” this platinum-cased wrist candy will retail at just about $200,000.

 

Greed at a Glance

Photographer Kevin Abosch may have the best gig in the gig economy. He shoots black-backdrop portraits of Silicon Valley CEO heavyweights. A commissioned Abosch portrait, reports Business Insider, can run a status-conscious high-tech exec up to $500,000.

Botox, how vulgar! These days no one who’s anyone lets a cosmetic surgeon puff up an aging facial feature. High-tech health shops like London’s Omniya clinic get at wrinkles instead by rebuilding “fraying” DNA. This new forever-young look runs a mere $17,500 a year to maintain.

 

Inequality by the Numbers

February 2916 infographic

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Stats of the Month

U.S. corporations are now paying $5,000 and up on annual health physicals for their CEOs, a new analysis of executive perks reveals. Meanwhile, over the first 10 weeks of the 2016 federal fiscal year, 227 corporate employees have died in on-the-job incidents, none of them CEOs.

JPMorgan Chase CEO Jamie Dimon had a sweet 2015. His compensation package jumped by 35 percent to $27 million. Dimon’s most significant contribution in 2015? He cut 6,761 JPMorgan jobs. 

We may have more than a CEO pay problem in the United States: At Apple last year, five execs who rank below chief executive Tim Cook each pulled in $25 million.

The 16,000 Americans who make up the nation's wealthiest 0.01 percent hold about as much wealth as the 256 million Americans with net worths under $277,000.

In 1983, the typical U.S. family had a net worth of $95,879, an inflation-adjusted figure comparable to the $98,057 wealth of the typical U.S. family in 2013. Over those same years, by contrast, upper-income households — those with at least twice the wealth of typical households — saw their median worth soar from $323,402 to $650,074, notes a new Pew study.

A Harvard Business School analysis of $2.4 trillion in S&P 500 company profits has found that 54 percent of that income went to stock buybacks that help boost executive pay, 37 percent to dividends that enrich shareholders, and 9 percent to R&D and training and raises for workers.


The Too Much Interview

What Do Our Wealthiest Really Deserve?

Our world’s billionaires don’t merit either their billions, the economist Didier Jacobs suggests, or the right to claim we’re somehow all living in a ‘meritocracy.’

Defenders of our deeply unequal global economic order had to put in a bit of overtime last month. They had to explain away the latest evidence — from the global charity Oxfam — on how concentrated our world’s wealth has become. A challenging task.

Didier JacobsBack in 2010, Oxfam’s new stats show, the world’s 62 richest billionaires collectively held $1.1 trillion in wealth, far less than the $2.6 trillion that then belonged to humanity’s least affluent half.

Now the numbers have reversed. The world’s top 62 billionaires last year held $1.76 trillion in wealth, the world’s bottom half only $1.75 trillion.

“Far from trickling down,” Oxfam concludes, “income and wealth are instead being sucked upwards at an alarming rate.”

Flacks for grand fortune have a justification for this top-heavy state of affairs. We live, they assure us, in a meritocracy. Those with great wealth have made great contributions. They merit their “success.” If we want to encourage talent and hard work, we simply have to accept the inequality that meritocracy will inevitably produce.

Do our grandest fortunes really reflect merit? Oxfam economist Didier Jacobs last year set out to examine that question, and he has just published a paper that offers a fresh new take on meritocracy and the rhetoric and reality behind it.

Too Much editor Sam Pizzigati last month asked the Boston-based Jacobs to share the thinking that underlies his innovative new research.

Why should the wealth that comes from inherited talent be considered merited?

Too Much: People who defend grand fortunes typically don’t defend all grand fortunes. They’ll readily acknowledge that some rich people haven’t done anything that makes their riches merited. But then they’ll argue that most of our wealthy do owe their wealth to personal talent and effort. What do modern philosophers like John Rawls have to say about this “meritocracy” defense of inequality?

Didier Jacobs: Many philosophers see talent as genetically or socially inherited. Even effort, Rawls contends, stands largely — if not completely — out of an individual’s control. Gifted people raised in supportive environments with access to great opportunities will find working hard to nurture their talents much easier than folks who lack a supportive environment.

Proponents of meritocracy don’t consider inherited wealth to be merited. So why should the wealth that comes from inherited talent be merited?

Read the rest of the full Too Much interview . . .

 

Quotable

“Maybe it’s time companies were forced to limit their executive compensation to no more than 10 times the income of their lowest-paid employees.”
Diana Hooper, Top CEO salaries immoral, Toronto Star, January 16, 2016

“The current economic system has ‘wealth extraction’ masquerading as ‘wealth creation’ to the long-term detriment of everybody, even the super rich.”
Andrew Sayer, Moral Economy, Open Democracy, January 20, 2016

“Anyone who shrugs and claims that change is just too hard has crawled into bed with the billionaires.”
U.S. Senator Elizabeth Warren, Senate floor remarks, January 21, 2016

“It is a sin to believe the poor can be better served by making it easier for the rich to accumulate more wealth.”
Rev. David Wilson Rogers, Economic Inequality, USA Today Current-Argus, January 22, 2016

“You don’t pour money into rich people and have prosperity pop out the other end like donuts.”
Nick Hanauer, A Billionaire's Two Cents, Iowa Public Radio, January 26, 2016

“One pundit recently warned Democrats that change happens incrementally, by accepting half loaves as being better than none. That may be true, but the full loaf has to be large and bold enough in the first place to make the half loaf meaningful. And not even a half loaf is possible unless or until America wrests back power from the executives of large corporations, Wall Street bankers, and billionaires who now control the bakery.”
Robert Reich, Want to reverse sky-high inequality? Guardian, January 27, 2016


Petulant Plutocrat of the Month

Philippe DaumanThe hedge fund vultures are circling around the 92-year-old billionaire Sumner Redstone, the chairman of the cable TV giant Viacom, and Viacom CEO Philippe Dauman doesn’t like that squeezing one little bit. Fund managers are claiming that Redstone, as one lawyer puts it, can no longer “write or speak intelligibly.” The hedgies want Redstone axed from his board chair slot, a position that paid $13 million in 2014. But Redstone, says Dauman, “has accomplished a whole lot.” Adds the Viacom CEO: “We should retain a sense of decency here.” The Redstone-led board, for the record, has been quite decent to Dauman. He pulled down $54.2 million in 2015, a year that saw Viacom’s share value plummet 44 percent.

 

Plutocrats at Play

Zoom, zoom, zoom: A high-tech mogul in New Zealand has gone off to one of his nation’s most remote spots to build a factory for making the world’s fastest track car. The vehicle will go over 186 mph and cost as much as $750,000. Deep-pocket David Dicker figures he’ll sell 40 of his speed cars a years. His target market, says Dicker, will be “rich guys, obviously.”

Antidotes to Inequality

Why the Rich May Have Cause to Fidget

The Democratic primary contest between Hillary Clinton and Bernie Sanders may be focusing more public attention on alternatives for taxing the rich than any race for the White House since 1912.

Clinton is advancing a tax plan that would impose a 4 percentage-point “fair share surcharge” on incomes above $5 million. The 400 richest of these taxpayers, the IRS recently revealed, paid only 23 percent of their average $250-million incomes in federal income tax in 2013. Under the Clinton plan, that overall tax rate would jump to 27 percent.

White House hopefuls haven’t talked this much about taxing our wealthy since 1912.

Clinton’s tax plan also shuts two prime loopholes that the rich exploit at tax time, including the one that 2012 GOP nominee Mitt Romney used to shield over $100 million in retirement accounts from taxes.

The Sanders tax-the-rich thrust would add several new high-tax brackets to the federal income tax. Under the Sanders plan, the nation’s richest 0.01 percent — about 13,000 taxpayers in all — would pay Uncle Sam 52 percent of their income over $10 million.

Income between $2 million and $10 million, meanwhile, would face a new 48 percent rate, with a new 43 percent rate on income between $500,000 and $2 million. The current top federal marginal tax rate: 39.6 percent.

Sanders would also raise the estate tax on the nation’s largest fortunes, eliminate the preferential treatment of income from capital gains and dividends, and prevent households making over $250,000 from saving more than 28 cents in taxes from every dollar in tax deductions.

Thomas Piketty calls for a wealth tax with rates that rise as grand fortunes increase.

More new thinking: A pair of the world’s most perceptive analysts of wealth concentration — the French economist Thomas Piketty and the UK’s Anthony Atkinson — last month updated their take on the most promising approaches for creating a more equal world.

Both are stressing that we need “to change the pre-tax distribution of income,” as Atkinson noted in an interview with Ethical Technology, and not rely solely on taxing the rich at higher levels. But higher taxes on the rich, both also stress, can help build a more equal “predistribution.”

Atkinson wants to see a wealth tax robust enough to fund a significant “minimum inheritance for everyone” that would kick in at age 18.

What sort of wealth tax might work best? Piketty, in an online exchange devoted to bestseller Capital in the Twenty-First Century, is pushing for an annual tax on wealth, with rates that would rise and fall depending on how fast grand fortunes are increasing . . .

Tax attorney David Miller has detailed the mechanics of how a comprehensive annual tax on the wealth of America’s wealthiest 0.1 percent could work. The “mark-to-market” levy he lays out would raise at least nearly $1 trillion over the next 10 years . . .

Economist Dean Baker is proposing a radical overhaul of the loophole-ridden U.S. corporate tax code. His new approach would end taxes on corporate profits and require corporations instead to turn over nonvoting shares of stock to the government. These shares would, in turn, become a major federal revenue stream. If a company paid a dividend, for instance, that dividend would go to the government as well . . .

From Ecuador, another innovative twist on handling corporate dividends. The nation’s 2008 constitution enshrines a “living wage” as a prime social goal, and companies that do business in Ecuador now must pay a living wage before they can send out dividends to shareholders.

 

Take Action
on Inequality

Over 1,500 Americans from all walks of life have so far pledged to join “a sit-in to save democracy from the billionaire class.” They’ll be gathering this spring at the Capitol in Washington, D.C., after a march that will begin April 2 at Philadelphia’s Liberty Bell, “where the dream of American democracy took flight.”

The 2016 election, the call for this civil disobedience action notes, will “be the most billionaire-dominated, secret money-drenched, voter suppression-marred contest in modern American history.”

A growing coalition of over 50 organizations has so far endorsed the action. For more information, check Democracy Spring online.

 

Reports

A quick look at major new inequality-related research efforts

High economic inequality leads
higher-income individuals to be less generous

Stéphane Côté, Julian House, and Robb Willer, Proceedings of the National Academy of Sciences, December 29, 2015

We know from recent studies that high-income people disregard traffic laws more frequently than poorer people, feel less compassion for cancer patients, and offer less help to strangers in distress.

This new study from researchers at the University of Toronto and Stanford may now herald the beginning of a second-generation of research on rich people. What matters most to the behavior of the wealthy, this new research suggests, may be more the level of inequality that surrounds them than the size of their fortunes.

High-income people show less empathy and more greed in highly unequal states.

Rich people do show less empathy and more greed than people without substantial wealth, the research finds, but “only under conditions of high economic inequality, contexts that can foster a sense of entitlement among higher-income individuals that, in turn, reduces their generosity.”

In the United States, higher-income people turn to be less generous than their lower-income counterparts in the nation’s high-inequality states, but not in more equal states.

The Toronto and Stanford researchers also conducted a series of experiments that confirm “the tendency for higher-income individuals to be less generous” only where inequality runs high.

Their explanation? Where income concentrates “in the hands of fewer people,” they write, “higher-income individuals may come to compare themselves more favorably relative to the general population.” That comparison leaves the wealthy in highly unequal places feeling more deserving than others — and more entitled to society’s resources.

Top Incomes and Human Well-being Around the World
Richard V. Burkhauser, Jan-Emmanuel De Neve, and Nattavudh Powdthavee, Oxford University Saïd Business School Research Paper, December 2015

Income inequality leaves even a society’s wealthier people less happy with their lives.

We know much more today about the size of top 1 percent fortunes than we knew a decade ago. But we still know, researchers from Cornell, Oxford, and the London School of Economics posit in this new paper, “little about how the rising top income shares affect human well-being.”

This new research is going to help fill in the blanks. The three authors have become the first to “empirically link the rising share of national income accruing to the top percentile to aggregated well-being.”

Co-authors De Neve and Powdthavee have thoughtfully summed up, in less technical language, exactly what their research shows.

“Income inequality makes us all less happy with our lives,” the pair write, “even if we’re relatively well-off.”

Just how less happy? A 1 percent increase in the income share of a nation’s top 1 percent “hurts life satisfaction as much as a 1.4 percent increase in the country-level unemployment rate.”

Why would a rising 1 percent income share negatively affect people up and down the income ladder? Even if you rate as well-to-do middle class, De Neve and Powdthavee note, some things — from private schools to houses in the best neighborhoods — “start getting priced beyond your reach” as the really rich get richer.

Global Executive Compensation 2015:
Survey of FT Global 200 companies

E-reward, January 2016

This comparison of CEO pay around the world covers the biggest 200 companies that appear on the annual Financial Times Global 500, a listing that includes corporations ranging from Apple to Samsung and BMW.

Typical U.S. CEOs are pulling down twice as much pay as their German counterparts.

CEOs in North America turn out to far outpace their fellow top execs. In the reporting period that ended last May, the typical North American CEO pulled down $17.2 million. The median annual pay in the UK and Germany: $7.8 million. The strikingly lower median in Japan: only $720,000.

Also just released: Economists Emmanuel Saez, Gabriel Zucman, and Thomas Piketty have released new data — based on tax, survey, and national accounts numbers — that tracks the unfolding of America’s income inequality since 1913. In the postwar years right before 1980, the data show, incomes for the bottom 90 percent actually grew at a faster annual rate than incomes for the top 10 percent. Since 1980, top 10 percent income has grown at a pace over three times faster . . .

The first industrial revolution revolved around the introduction of steam power. Electricity and electronics drove the next two. Now, says a new study from the Swiss bank UBS, hyper automation and connectivity are driving a fourth industrial revolution that will polarize 21st century workforces and leave “higher potential levels of inequality” behind . . .

A two-year study of London’s most expensive neighborhoods is charging that political leaders are acting as “ushers and butlers” to the world’s wealthy, enabling the massive construction of luxury dwellings at the expense of affordable housing for the poor and middle class.

 

New Wisdom
on Wealth

Robert Kuttner, The New Inequality Debate, American Prospect, winter 2016. A look at the changing mainstream economic perspective on our economic divides. 

Yessenia Funes, Income Inequality a Health Hazard — Even for the Rich, Yes! January 4, 2016. When wealth can’t buy health.

Justin Fox, Why Economists Took So Long to Focus on Inequality, Bloomberg, January 4, 2016. On the suppression of knowledge.

Deborah Hargreaves, Where is the boss big enough to admit: ‘I’m not worth it’? Guardian, January 5, 2016. The gap between the huge salaries at the top and bottom is outstripping not just decency but logic.

Paul Kiel, Institutional racism and the wealth gap America still refuses to acknowledge, ProPublica, January 9, 2016. Beyond Ferguson.

Andrew Ross Sorkin, When Restless Billionaires Trip on Their Toys, New York Times, January 11, 2016. The whimsy of our wealthy.

Teresa Ghilarducci, How the Government Underestimated the Extent of Income Inequality, Atlantic, January 12, 2016. Social Security remains underfunded because policy makers didn’t foresee how rich today’s rich would be.

David Cay Johnston, Rockefeller price gouging returns to petroleum industry, Aljazeera, January 14, 2016. Our pipeline plutocrats at play.

Michael Massing, How to Cover the One Percent, New York Review of Books, January 14, 2016. Imagining a press that actually made an effort to cover plutocracy. 

Doug Militor, 12 Ways to Soften Income Inequality Without Taxing 62 People, Huffington Post, January 19, 2016. A comedy writer offers a rich-people gameplan.

Richard Hasen, New Thinking on Rescuing Our Politics from Plutocrats, Moyers & Company, January 20, 2016. Our politicians have no incentive to pay attention to anyone not rich.

Chris Lehmann, Forget Techno-Optimism: We Can’t Innovate Our Way Out of Inequality, In These Times, January 27, 2016. Our Uber-ized future, through rose-colored glasses.

Harold Meyerson, What CEOs Do for a Living, American Prospect, January 28, 2016. They disinvest in productivity and reward themselves for doing it.

Dean Baker, Understanding the Trump/Sanders Constituencies: Inequality Is Something the Elites Did, Center for Economic and Policy Research, January 2016. Today’s inequality just didn’t happen.


 

Retorts

Handy rejoinders to the apologists for our top-heavy status quo

A ‘Manufacturer of Inequality’ Speaks!

The claim: Any society that insists on a significantly more equal distribution of wealth will torpedo the innovation that leads to wealth creating in the first place.

California venture capitalist Paul Graham may well be the “smartest man in Silicon Valley,” just as many of his high-tech admirers consider him to be. But smart people can make remarkably dumb pronouncements.

Graham has greeted the new year with a widely publicized essay where he provocatively identifies himself as “a manufacturer of economic inequality.” The start-ups he helps entrepreneurs create, Graham goes on to explain, will “almost by definition” make their founders rich — and increase inequality — if the start-ups succeed.

But if we try to prevent that inequality, Graham’s line continues, we would risk preventing that success. And why would we do that? After all, as Graham also noted last month in a follow-up to his original essay, “economic inequality per se is not bad.”

That claim, Tech Crunch analyst Jon Evans points out, becomes simply ridiculous once you stop to think about it. Asks Evans: “Would it be just fine if a thousand people on Earth held all the wealth, while the other 7 billion were left penniless?”

Would it be just fine if a thousand people on Earth held all our wealth?

Other Graham critics have pointed to a host of other “woefully unconvincing straw-man arguments” and incidences of “remarkably sloppy logic” in Graham’s earnest philosophizing on behalf of inequality.

Among the many points critics are making: Economic inequality hurts everyone, not just the poor Graham says he wants to help. The start-up share of new jobs created has actually decreased since the United States has become more unequal. The rise in top 1 percent incomes “largely reflects the soaring pay of top executives, not the rewards to innovation.”

Graham misses one other important reason why inequality is so messing us up. Inequality, Holly Wood observes in Quartz, “makes men like Paul Graham think they’re geniuses.”

 

What to Watch

In the new PBS documentary Dream On, political analyst John Fugelsang explores the state of the American Dream after decades of rising income inequality. Watch it online.

Scott Nelson has completed the first episode of Plutocracy, a five-part series that aims to examine early U.S. history through the lens of class. Now available online at Films for Action.

Now featured on
Inequality.org

Chuck Collins on why negative wealth matters

Josh Hoxie on the latest wealth gap research

Sarah Anderson on 2016’s first CEO pay milestone

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on Inequality.org postings

 

 

Books

Inequality: Why We Need Not Despair

Reid-Henry-bookThe Political Origins of Inequality: Why a More Equal World Is Better for Us All
Simon Reid-Henry
University of Chicago Press, 214 pp.

Back around the time of World War I, observes the British geographer Simon Reid-Henry, the richest 20 percent of the world’s population earned 11 times the income of the poorest 20 percent. Some four score years later, the world’s most affluent fifth was grabbing 74 times as much.

This exploding divide, the early chapters of The Political Origins of Inequality remind us, didn’t have to happen. Political decisions, not natural disasters or economic iron laws, are driving inequality ever wider, and Reid-Henry guides us through these decisions with grace and grit.

“We need to look afresh at the usual reasons given for the poor remaining poor,” he writes, “and what these reasons conceal about the ways the rich keep getting richer.”

But our political leaders would rather keep on concealing. They fear questions about income and wealth distribution, Reid-Henry contends, because such questions pressure them to start “challenging the privileges of the rich.” They’d rather not.

Yet Reid-Henry remains optimistic. He sees the constituency for change expanding — from the struggling poor and middle class to even some very rich themselves. The ranks of the rich, he points out, now include a “growing number” of privileged “tired of the felt need for security from the rest, tired of the ‘social cost’ imposed by the misery of others.”

History gives author Simon Reid-Henry hope for a more equal global future.

History gives Reid-Henry hope as well. Sweden, he notes, ranked as Europe’s poorest country back in 1900. In the stormy 1930s, the country struck observers as a “cauldron of conflict.” Nearby nations were descending into fascism. But Sweden didn’t.

Progressives in Sweden reached out. They united workers, farmers, and middle-class professionals and struck bargains with business. They “offered sanctuary from the forces of economic and political destruction” and convinced one and all that “by investing in collective needs first, citizens would reap a more reliable suite of personal benefits later.”

We need today, Simon Reid-Henry believes, to “internationalize” the lessons of Sweden and Scandinavia. In The Political Origins of Inequality, Reid-Henry has made that daunting task seem eminently doable.

 

We had no “billionaire class” a century go. But we did have a class of rich powerful enough to threaten our democracy. That rich, by the 1950s, no longer posed a serious threat. What happened? Too Much editor Sam Pizzigati tells that story in The Rich Don’t Always Win, his lively history of the triumph over America’s initial plutocracy. Try the first chapter online, then order at the special publisher’s discount.

RDAW cover


About Too Much

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