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Thursday, March 24, 2011 06:30 pm

‘I’m all right, Jack.’

Reflecting on the Forbes billionaires

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Years ago, when I kept an office downtown, prurient curiosity caused me to drop by the PO every once in a while to check out the creeps on the FBI’s latest Ten Most Wanted list posted in the lobby. These days I look forward to the release of Forbes magazine’s annual list of the world’s billionaires for pretty much the same reasons. The list for 2011 comprises 1,210 people, the most ever, and their combined wealth exceeds the gross domestic product of Germany.

The U.S. counts more than 400 citizens among this moneyed elite (18 of whom live in Chicago). They include (give or take a Sam Zell) the richest 1 percent among us, who control 40 percent of the nation’s wealth.

For decades the attitude of the U.S. middle class toward income inequality was, “I’m all right, Jack. I’ve got mine.” Incomes for all classes were rising, and if the rich got way more, well, who cared? There was plenty to go around. No more. The inflation-adjusted income of the median U.S. household actually declined (by nearly 5 percent) during the 2000s, the first time that’s happened since at least the 1930s.

Not only is the proverbial economic pie not growing as fast as it used to, the very rich are gobbling up more of it. Their share of national income tripled between 2002 and 2007. Indeed, almost all the profits generated in recent years by increased corporate productivity went to owners rather than to workers in the form of higher wages. One result is that 52 percent of all the increase in U.S. gross domestic product from 1993 to 2008 wound up in the hands of the wealthiest top 1 percent.

“I’m all right, Jack. I’ve got yours.”

We saw this kind of cavernous gap between the have-most-of-its and the have-nots in the past, during the Gilded Age. Thanks to the new railroads (built, please let it be remembered, with the help of massive government subsidies) manufacturers then as today suddenly found themselves catering to lucrative new markets – national rather than global in scale, but still massive. And as today, such firms could make cheap and sell dear thanks to another fruit of government policy in the form of liberal immigration rules; the underpaid foreigner forced to work in inhumane conditions came to the factories in cities like Chicago to be exploited, sparing the owners having to send the factory to the foreigner, as they do today.

A few of today’s economic winners are entrepreneurs of this old-fashioned sort. (We will leave for another day a discussion of the relative social utility of a Philip Armour making fresh meat available to hungry people via the refrigerated rail car and Mark Schmuckerberg making twaddle available to bored teens via Facebook.) Most of the very rich simply collect rents from the ownership of assets built by others.

Money counts more than votes in U.S. politics, and those who have it use it to rig the tax code in their favor. Yes, the very rich pay most of the federal taxes measured in dollars, but then people who drive a lot pay most of the gas taxes, too. The very rich still pay less of what they owe because of economically dubious exemptions that allow the very rich to “structure their income” (Megan McArdle’s lovely euphemism) to avoid taxes. Contrary to our national myth, social mobility is lower in the U.S. than in countries such as Denmark, Sweden and Australia. Our government programs redistribute less wealth than in other advanced economies, in large part because the effective tax rates on the rich are lower.

Even Alan Greenspan, whose policies did so much to water the already lush gardens of the very rich, has expressed disquiet about what has been called our winner-take-most economy. It would be fatuous to suggest that we will see anytime soon scenes like those we saw in Egypt recently. Indeed, the curious reaction of the U.S. middle class has been not to resent the very rich but to try to imitate them – and drive themselves ruinously into debt in the process. However, a national government run for the very rich will not forever command the respect, and ultimately the obedience, of the never-going-to-be-rich.

I don’t believe in confiscatory tax rates, if only because today’s internationalized elites will simply move their wealth offshore, as many already have. Nor do I believe in redistribution as a moral good in itself, or in governments telling companies how to run their businesses, distasteful as I find such business “innovations” such as the Wal-Mart’s part-time, minimum-wage jobs policy that constitute sweated labor in new guises. However, I do think it would be rather nice if some of the hundreds of billions in private corporate and personal wealth diverted from the treasury were spent for public purposes, if only to cope with the public poverty that this mad accumulation of private wealth is creating.

Contact James Krohe Jr. at peptobiz@mindspring.com.
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