Myths of the 1 Percent: What’s Putting People at the Top
nytimes.com
nytimes.com
I assume the Forbes 400 richest are in the 1%. How did the Koch brothers get their $100 billion? Where did the Waltons get their $140 billion? Where did the Mars family get their $75 billion? The article makes it sound like these people became rich when they decided whether or not to go to law school.
It's important to note how in the US how FIRE (Finance, Insurance, Real Estate) and health care affect the economy. But a lot of what puts people at the top is at which hospital they took their first breath.
http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding...
Estimates put the total net worth of the world's richest 1% at 140 trillion.
The Forbes 400 has about 2.7t net worth.
Similarly, it is possible to earn $200k/year (not in the top 1% for income) and save very aggressively.
The Walton fortune was earned... by Sam Walton. If he wasn't allowed to leave it to his family, what does property even mean?
In my view, there should be some correlation between hard work, smarts and financial outcome that isn’t entirely determined at birth.
The democratic urge to use the state for preventing the transfer of wealth between generation is sickening. It shows neither a respect for property nor liberty.
Some people are born with above average intelligence, or above average physical skills. Nothing wrong with that either.
Why shouldn't people be allowed to inherit significant fortunes?
Generally the tax is not supposed to be on inheritance but on unreasonably frozen money. Inheritance tax is a work around.
Skills when applied are supposed to be net positive for society.
Additionally with money comes influence, media and politics. Stagnation in those areas is risky too.
You act as if all inherited wealth is just sitting in bank accounts. Some is, some isn't, some heirs are active in and good at business, others aren't.
This as opposed to direct investment (VC or starting new enterprises). even having a controlling share in a company is not exactly the same. Working on a business is not enough of most of the money gets frozen in fixed assets or rented away to bankers.
It's a lot easier making money through Private Equity deals.
If I had $100m, I wouldn't be putting it in a VC fund. Not saying I wouldn't make direct investments, but I would only make those on the assumption the money is gone.
I don't think anyone makes investments in the stock market and private equity on the assumption the money is gone.
Moreover the real unasked question is, how the company benefits the society if at all.
Capitalism really promotes amoral and immoral investing. Biggest returns for lowest cost and risk to investors.
I think you have things wrong; companies aren't set up to benefit society. They're set up to benefit a select group of individuals.
Where are the Scrooge McDuck money bins? The money is invested. Or it's spent and someone else has it.
Inheritance tax is a double tax. The money was already subject to income tax, capital gains, property tax, sales tax, etc. If the problem is that capital earnings accumulate faster than labor earnings, then we should just address that problem.
Property isn't about what it does for the rest of society. Property is a human right. Taxes generally are on voluntary actions for a reason. You choose to purchase something, own taxable property, emit carbon, etc. People don't choose to die, so it's an involuntary tax, something we should think about.
Lots of people don't care about the ethical implications for personal reasons, I guess, and that's their prerogative. But there's no moral high ground on not caring about the ethics of property rights.
A rhetorical question isn't a troll. If someone is a troll, just flag them.
> explain to me how we don’t end up with a feudal society in a generation or four
As wealthy people die, they give their money to foundations and split it among their progeny and spouses. Some of them, it turns out, aren't great with money. The richest of the rich are no longer Carnegie, Rockefeller, or Weyerhäuser. A few generations out and the fortune is already spreading out naturally. Sure, some grandchildren are regional socialites and minor celebrities, but we're not exactly worried about which politicians Paris Hilton is palling around with.
Your system of “natural” fortune spreading was the default for all time until the modern welfare state came along. That’s what you want to return to? Hope that stupidity somehow spreads wealth the best?
Also, you make it sound like Sam Walton somehow has a debt of gratitude to a society for it allowing him to get rich. I think that no such debt ever exists: in exchange for those billions of dollars Walton made society has already gotten something equally valuable in return, i.e. Wal-Mart mall in every city, providing cheap and easy access to all kinds of consumer goods. That's how business works: making money by providing services that society finds valuable.
You’ve just made the interesting argument that because it’s yours, it’s yours. Not sure I’m convinced by that.
The point of the interview was to learn about his personal philosophy. Something of which wouldn't be of much interest were it not for his huge amount of influence (that, again, no one is arguing).
As for the final thrust of this response, on how Koch helped stopped a supreme Court nominee, it's likely nothing nefarious. It would be the same as any citizen. Contact your congress people. Difference is, they are going to really listen to the billionaire donating money to their campaign a bit more than your average Joe.
It's legal because of the Citizens United Supreme Court decision, but I hope that, before the Koch brothers pass away, we'll see a constitutional amendment overturning this egregious decision.
The idea that money = speech is toxic to democracy.
Let's say I'm an individual, and I support Santa Claus for president. But I'm also a famous personality, and I spend a million dollars to put on a free speaking tour where I support Santa Claus for president. Aren't I using money to support my speech? I'm not just using my mouth, I'm using my money to pursue my first amendment rights.
It had been, for decades, illegal for one person to support one specific candidate/campaign. It was never quite enforced such that it made a huge difference (shell companies, PACs, etc make it easy to skirt rules and funnel campaign support) and candidates get progressively better at asking for "support" without actually making the tit-for-tat which moves it from the "lobbying" arena to "bribery".
Also, IIRC that ruling established the precedent needed for SuperPACs and moved the individual contribution threshold.
https://www.forbes.com/sites/afontevecchia/2014/10/02/the-ne... https://www.forbes.com/forbes-400/list/
Any credible list of "self-made this" or "successful entrepreneur that" should include a disclosure of parental wealth.
There are big differences between how Laurene Jobs (1), Charles Koch (5), Bill Gates (8) and Oprah Winfrey (10) became as wealthy as they are, and it reflects that.
Your hypothetical is why I agree a scale is better than a binary classification. I guess we might just disagree on the grade.
So that is the bearing for this scale they made to keep in mind - the 8 of 10 toward "self-made" are the type of people who were going to $50,000 a year high schools.
I went to boarding school and came from a family of two church musicians. Some of my classmates came from wealthy families, others came from very modest backgrounds.
I'm a citizen of third-world country that is being sucked dry by the West for its resources and getting its people shackled to the ground by direct support for the ruling dictatorial regime.
I don't even know why I'm writing this..
When it comes to the rich vs poor in Western society we are ostensibly equal and many people are upset because reality doesn't reflect that. When it comes to the US vs say Burkino Faso, what would the correct course of action be? There's exploitative actions being taken by individuals and companies against developing nations that could stop, but then what happens? I don't think sweatshops are good but no western company is going to source goods from them if they aren't cheap as the quality isn't the same. We could try to help other nations get to the same quality of life, but many have made it explicitly clear that they don't want interference from foreign powers.
Do we act paternalistic and do what we think is right for other people which removes their autonomy? Do we avoid that and avoid exploiting them, but leave them in the dust because they have nothing we want or need if they are using regulation and price arbitrage to gain business? Do we continue as we currently do which sends money into these countries which should help them develop, but tends to be spread unevenly and causes a lot of human despair?
I can't tell what the right answer is, I can't tell if there even is a right answer
2. We do want interference, interference against your current interference.
3. Just let us establish our own instutitions, stop helping and making deals with criminals, stop putting on the mask of being humanitarian and then exploiting the living shit out of us.
4. Work visas - please make them available for the skilled and offer us some channel for escape. We are majorly landlocked because our passports don't even grant us a tourist visas to anywhere other than bumhole Somalia or Afghanistan.
I could go on for ages but you people have so vastly different view on these issues I don't even feel like it would be worth my time.
We, as a country, are not in the business of "country-building" but rather survival and that of avoiding pain. Our government doesn't need talented individuals - they just need brainwashed populace and stability for their power. Thinkers are direct infraction to the system and usually are not tolareted.
Also, what do you expect disarray of talented individuals with no power to concentrate power to do alone in a society that doesn't recognize nor like them?
In asking this, I'm assuming that since you say "here", your PoV is the United States. If that is incorrect, I apologize.
Is your argument that "the West" isn't paying enough? Or that the money being paid isn't making its ways into the right pockets, or, ... what?
EDIT: To be clear ... I simply don't understand your summary of the complex phenomenon of "being sucked by the West".
Your preposterous, jingoistic, anti-Western sentiment has no place in intelligent discussions. You don't even identify what country you are from or if you were even born/raised there.
And also, from your other comments - you live in the West. The very prosperity you are enjoying you are condemning that others have it around you. You are a hypocrite and reading further statements from you is useless.
As with anything, i've noticed the discussion is really about how much, not should it exist at all. Almost every debate in American politics is painted as black and white, whereas the actual debate is where we fall on a spectrum. It seems like everyone disagrees so much, but really I think we are haggling over a slight deviation to the right or to the left and because we have to talk about everything in such black and white terms, the real discussion gets lost. We all agree on much more than we disagree on.
And, to a large extent, of animals. I suppose there are some animal species where all members are more or less equal, but they're probably mostly solitary animals which rarely interact with each other. In social species, massive inequalities, particularly between males, are the norm.
― Madeleine L'Engle, A Wrinkle in Time
The most obvious place to see this is looking at parents' economic outcomes versus their kids' development opportunities, but it doesn't even have to be generational.
If you have a sack of money (outcome), you automatically have many more options (opportunity) for creating a larger stack of money. Imagine a fair and random gambling game: Insolvent players are removed from the game, so the player with the deepest pockets at the beginning has the best opportunity of winning everything.
Where does crony capitalism fit in?
The other systems have this bug as well. Somme people have an intense drive to accumulate power, no matter the cost to others, or rationalize the cost away. Worst are those of them with bad ideas or totally irresponsible.
Not true. The highest income 1% have seen their share of national income roughly double. But the highest income 1% is not the richest 1%.
Americans enter and fall out of the 1% all the time. Some significant fraction of 1%'ers are there for the one and only year they sell their home, for example.
For example, one might see an article complaining that some percentage of wealthy people didn't pay income tax last year. But an income tax is a tax on income, not wealth, and it's commonplace for wealthy people to have a bad year and lose money.
https://mobile.nytimes.com/blogs/economix/2012/01/17/measuri...
Some might blame loose monetary policy for providing easy money for the 1% in the USA (if you can borrow money and speculate for free, why not, after all), but if that's the case Japan really stands out; they've been QE'ing since their '80s bubble popped and they've managed to keep a relatively good Gini coefficient relative to the rest of the developed world (they're more egalitarian than their East Asian peers). You'd think that having two lost decades with your economy stuck in neutral, the Japanese 1% would just leave their country in the dust.
This talks about the 1%, not the few super rich, which is less than 1 out of 100.
It's confusing because often when people say "the 1%" they actually mean multi-millionaires; which is less than 1%.
Most 1%'ers are elite professionals. And this articles argues they make more money because of regulation that creates barriers to competition.
The super rich multi-millionaires and billionaires is a different story.
https://mobile.nytimes.com/blogs/economix/2012/01/17/measuri...
It is not okay for people like Bill Gates (i do think he is a good person) or Mark Zuckerberg to have that much power on such a small planet.
It is awesome that someone like Bill Gates spends tons of money for research etc. but he should not be able to make such huge decisions in a modern democratic society.
There is a good reason to allow people to accumulate wealth. Why shouldn't someone be allowed to not spend all his/her money for alcohol, party and cars or whatever and instead put the money into real estate for there children. But something like 5-10 Million per Child is still super reasonable.
Perhaps that leads the way to a more fair feature where it is not necessary for anyone anymore to horde money for the familiy heritage.
But incidentally, someone's ability to make a lot of money (or worse: inherit it) doesn't imply that they have any preferential ability to spend it in a way that benefits society. And when someone has the unchecked power to spend massive sums of money on themselves in ridiculous and frivolous ways, it's pretty clear that they have too much power. Because whoever should be making those decisions should certainly not be doing that.
Bill Gates rented a yacht for $5M/week. How is this not a clear waste? How much suffering could have been avoided at that cost? At least put it in some kind of public trust where such behavior can be properly considered corruption.
Those $5M don't just get lit on fire. They transfer to some other set of people who can then decide what to do with it, and then onto some other set of people. Maybe the yacht's owner donates all proceeds to feed starving children.
Not trying to argue that luxury goods are pure evil, but there is a degree of selfishness in having luxury goods for yourself when there are people who lack the basics.
Only saying it would be /even better/ if the people currently spending fortunes on yachts spent the money building libraries and the like instead.
Seems like 5 richest US citizens own less than 0,5% of all US assets.
I'd be lot more worried about organizations. JP Morgan chase and General Electric are not exactly democratic either. Both are way richer than Gates. And while church of latter day saints is not quite in the same league, it's incredibly wealthy and not at all democratic.
If you assume that Gates foundation gets 5% profits and distributes that, then it can share about 2,1 billion/year. American Red Cross gets to distribute 2,7 billion/year. Who does their homework better, Bill gates or the average guy who donates to Red Cross? And yet Red Cross is still not exactly democratic.
It doesn't seem very straight forward how you should count assets or income and deduct the monetary power from there.
If Gate's wanted to he could cause immense harm in the country.
It can be argued that some like the Koch's and Mercer's are doing that harm: depending on your political views.
What could be done? These people are literally untouchable. I think the Mercer's would be untouchable even by the US government, if they played their hands in a smart way.
...Unless we'd want to send the army after them, they could just hide on their yachts :)
Anyway, there's no realistic revolution you can have against these people, is my point. If that fear doesn't exist, well, they can do what they want, yes?
I know that what keeps my worst urges "in check" is because it is not healthy for me to act on those actions.
I'm talking about stuff like "pissing off my prior employer" and "saying fuck you to my boss."
I do not know what kind of impulses the .01% have ... I am afraid what I may say or do to that old employer's company if I didn't have to worry about repercussions!
What should I fear from them?
I'd claim that if Gates would have wanted to cause maximum harm, he would not have earned millions of dollars first. Just found an organization and go evil. It's more straight forward, less suspicious and more effective. Just look at Scientology.
Also
i think the power of companies is a problem too.
You should pick your battles. And the society should pick their battles. That way you get to have the cake and eat it too.
I do think that it is.
Bill Gates house animal have probably more security than i have.
What should be the upper limit and who defines it?
And what should that upper limit be? Who decides what it is, and how do we ensure that people powerful enough to get close to that limit don't simply play financial games to skirt these rules?
If the source of my wealth is unrealized capital coming from ownership of a company I founded, what am I supposed to do if my wealth nears the cap? What is to prevent bad actors from inflating my stock price to force me to sell? If I hold my companies privately, who decides what they are worth and by proxy how much wealth I possess?
It's hard to find comparable numbers, but aren't the median wages higher in all those countries?
The article vaguely makes it sound like it's just a matter of paying highly-paid professionals less, but would that lift the bottom or just concentrate the money to an even thinner slice of the population?
We have this massive underclass that is growing faster. The US is going to be like Brazil in 15-20 years. I’m sorry for my son’s generation.
Last I looked no; the bottom 30% is where Denmark does better than the US. The median wages are similar, maybe slightly higher in the US.
> The article vaguely makes it sound like it's just a matter of paying highly-paid professionals less, but would that lift the bottom or just concentrate the money to an even thinner slice of the population?
Good question. Probably you have to hit the super rich 0.001% with massive taxes, or an aggressive estate tax (preventing wealth from accumulating across generations).
But even with that, good regulation that facilitates competition is probably necessary. I wouldn't be surprised if that makes a bigger splash than the top 0.001%.
Note: there is good and bad regulation. Denmark is heavily regulated, but a lot of it is efficient and fosters competition.
>The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives.
Not a surprising result at all when you consider that the bottom of the top 1% has an income of high 6 figures to somewhat above $1M. That number is something very achievable for the most successful "professionals" -- doctors, lawyers, bankers (not HF managers), traders, and there are a lot of these people out there!
It's a natural consequence that if you look for a large number of people earning $1M, you'll end up with highly successful "professionals" rather than outlier level wealth from business ownership, which is much more rare.
First, you're assuming that all these "professionals" are not also business owners, which is often false; doctors and lawyers earning enough to put them in the top 1% are most likely owners of or partners in a private practice.
Second, if we restrict "business ownership" to those who are not "professionals", the fact that it is rare is a consequence of regulation, not an independent fact. Regulatory barriers don't just benefit "professionals" who have the requisite qualifications; they also hamstring people trying to start businesses not in those particular "professional" sectors.
So the result is only "not surprising" if you take the level of regulation we have now for granted.
Patently false. The political causes are directly under the control of the US state and federal legislatures, which are populated by whom?
I would have thought it was massively wealthy equity owners/holders, hedge fund managers etc..
But yes - if we are paying doctors $1M/year then this will happen.
At a nearby hospital in Canada, technology improvements have allowed doctors to diagnose using x-rays a lot faster ... but the Unions have kept pay scale the same. The doctor at the Orangevill hospital earns over a million dollars a year, and he works from home. Swipe, swipe, swipe, swipe - done.
Faster tech = more money for the doctor. Savings not passed on to taxpayers.
Innovators thought they were improving healthcare, but they really were throwing more surpluses onto the value chain, to be captured by those with the most power: doctors, possibly drug companies.
One would think a private system would be more efficient ... but it's probably just as bad in the US.
The US health care system is not a "private system". It's a mishmash of private and public which combines the worst features of both. The reason we have it in the US is that during WW II, the government controlled wages, so businesses trying to compete for employees had to offer something else as an incentive, and they mainly picked health care benefits. Then, when the war was over and the government stopped controlling wages, instead of going back to competing on wages and dropping employer-provided health benefits, the system of employer-provided health benefits kept on growing. Which now meant it had to be regulated by the government, and so on, and so on...
If you wanted to create a legal equivalent of indentured servitude, company healthcare plus high healthcare cost would be a great solution. I don't think that was the plan, but it sure works out that way.
It has become so entrenched it has more or less morphed into a "right" that employers should pay for it.
What kind of doctor is this, radiologist? I'm not aware of any mobile apps in use clinically, but a radiologist's job is to look at images on a computer screen. It doesn't matter where they do it from. Very little of it is automated.
> One would think a private system would be more efficient ... but it's probably just as bad in the US.
Canada is one of three countries in the world in which the government has a monopoly on healthcare payment. The other two are Cuba and North Korea.
The United States has the least efficient healthcare system in the G20. Canada's is second least efficient. All of the others have two tier systems.
The fact is he ears over $1M working from home, inspecting imaging.
Doctors should probably be highly paid but this is too much.
See "Competition and Monopoly in Medical Care" by Frech
The big driver of inequality ( 0.01% to 1% ) is ... government regulation. Directly, as in the government hires tens of thousands of highly paid people. And, more offensive at least to me, government regulation giving massive advantages to specific businesses (most recent "wtf" example I think would be equifax, with the government rallying behind them and (worst of all) effectively forcing large banks to buy from them). Businesses pushed like this by governments include Boeing, Oil companies, Tesla, SpaceX, ... But this is only the very upper layer. There is a huge "second" layer that includes large parts of the legal space, the health care space, the education space, where hundreds of thousands of people make $400k+ per year because ... well because the government says so.
Which of course very much opposes most of the viewpoints taken on this site. Given that this is what gives over half of the 1% owes their wealth directly or indirectly to taxes (or in the case of things like equifax "hidden taxes". Taxes, as in government forces you to pay, but you pay in your mortgage bill, you pay in charges on your bank account, etc ...) ... there is a strong case to be made that more taxes ... will increase inequality. At least as long as the government doesn't slim down a LOT.