|March 10, 2014|
|Jan Koum and Brian Acton, the founders of the messaging software WhatsApp, have ample reason to celebrate this week’s 25th anniversary of the Internet’s World Wide Web. The pair have just become billionaires.
Facebook’s Mark Zuckerberg, the youngest billionaire ever, gave Koum and Acton that distinction last month when he gobbled up WhatsApp for $19 billion. The three of them have lots of online company in the global billionaire club. Forbes now counts 120 other high-tech whizzes with billion-dollar fortunes.
The Internet has become, in effect, the fastest billionaire-minting machine in world history. Should we consider this incredible concentration of wealth an outcome preordained? Did the last 25 years of online history have to leave us so much more unequal? We ask that question in this week’s Too Much.
And what about the future? How might we change the online world to help create a more equal real world? We ask that question, too.
|GREED AT A GLANCE|
|New European Union rules adopted last year limit banker bonuses to no more than triple their base salary. Philippe Lamberts, a Belgian Green Party lawmaker, led the drive for that cap, and now he’s struggling to stop the British government from letting UK bankers sidestep the EU’s modest new pay restrictions. One such sidestep: Banking giant HSBC is now paying its CEO Stuart Gulliver an extra $53,500 every month as an “allowance.” Lamberts wants the EU to take the UK to court. Barclays CEO Antony Jenkins, for his part, is defending his bank’s bonus culture. Nearly 500 power suits at Barclays, half of them in the United States, are taking home at least $1.6 million a year. Paying them any less, says Jenkins, would force his bank into a “death spiral.” To do business in America, adds the CEO, we must “reconcile ourselves to pay high levels of compensation.”
Don’t talk to Miami maritime lawyer Jim Walker about greedy bankers. The real greedy, says Walker, are running cruise lines and incorporating their operations offshore to avoid U.S. taxes and wage laws. The greediest cruise character of them all? That might be Carnival Cruise chair Micky Arison. He’s now selling off 10 million of his Carnival shares, a sale that figures to bring in $395 million and still leave his family holding over $6 billion in Carnival stock. Arison’s share sale began as passengers left adrift last year on a faulty Carnival cruise ship were testifying on the lawsuit they’ve filed against the company. That incident subjected over 4,200 passengers and crew to five days of overflowing toilets and rotting food. Carnival is dismissing the suit as “an opportunistic attempt to benefit financially” from “alleged emotional distress.”
You won’t find any billionaires standing in line to get their family heirlooms appraised on the hit public TV series Antiques Roadshow. But the world’s ultra rich, luxury editor Tara Loader Wilkinson noted last week, are definitely “going gaga for antiques.” The average billionaire, calculates a new billionaire census from the Swiss bank UBS and researchers at the Singapore-based Wealth-X, holds $14 million worth of antiques and collectibles. Why are so many uber rich hungering for antiques? French antiques expert Mikael Kraemer notes that “anyone with enough money can buy a jet.” Not everyone, he adds, has “what sets one billionaire apart from another”: enough “culture and knowledge” to find and buy something like an 18th century antique royal chandelier.
Quote of the Week
“Do you recall a time in America when the income of a single school teacher or baker or salesman or mechanic was enough to buy a home, have two cars, and raise a family? I remember.”
|PETULANT PLUTOCRAT OF THE WEEK|
|Fracking can be a dirty business. Big Energy CEOs don’t mind. Can’t let those environmentalists endanger our energy security, they like to insist. Unless the environment at risk happens to be their own. ExxonMobil CEO Rex Tillerson has joined a lawsuit that’s trying to stop the construction of a 160-foot water — for fracking — tower near his manse north of Dallas. Tillerson isn’t talking about his lawsuit. But an Exxon flack says his boss doesn’t object to the tower “for its potential use for water and gas operations for fracking.” He’s just upset because the tower would be “much taller” than originally proposed. If the lawsuit fails, Tillerson might have to buy the tower site himself to prevent the fracking eyesore. He can afford it. His 2012 Exxon take-home: $40.3 million.||
|IMAGES OF INEQUALITY|
The promoters of the new “Wealth Badge” are either cynically exploiting a new luxury niche or acutely exposing the cultural depravity of our unequal times. Their new Web site offers the affluent a metal pin that reads “Because I can.” The cost: $5,000. Explains the Wealth Badge pitch: “The idea is simple: If you buy something just because you can, you are truly rich.” The site claims to have sold 61 badges — and features photos of privileged people showing them off. The pins have begun drawing media play. But no one has so far answered the basic question: Is the Wealth Badge crew trying to make money or a point?
|PROGRESS AND PROMISE|
|Few people have contributed as much to our online world as Jaron Lanier, the computer scientist who helped pioneer — and label — what we call “virtual reality.” Lanier has been wondering of late about his fellow contributors, those hundreds of millions of Internet users who donate — for free — the information that a tiny cohort of tycoons has been able to crunch into billion-dollar fortunes. In his latest book, Lanier envisions a “universal micropayment system” that pays people who go online for whatever information of value their online clicks may create, “no matter what kind of information is involved or whether a person intended to provide it or not.” Such a system, says Lanier, would help us “see a less elite distribution of economic benefits.”||
Youth groups eager to help young people understand inequality’s impact on how we relate to each other can download the Theatre and Education Resource Guide from the London-based Equality Trust, part of a package of interactive learning materials.
|inequality by the numbers|
Stat of the Week
The world’s “ultra high net worth” crowd — individuals worth at least $30 million — now number 167,669, says a new Knight Frank report. Their total wealth: $20.1 trillion in 2013, almost half as much as the combined net worth of the 4.2 billion global adults who hold less than $100,000 in wealth.
A Thought for the Web’s Silver Anniversary
Let’s learn from our not-so-distant past and share the gold. New technologies don’t have to bring us new inequalities.
Exactly 25 years ago this week the British computer scientist Tim Berners-Lee conceptually “invented” the World Wide Web — and began a process that would rather rapidly make the online world an essential part of our daily lives.
By 1995, 14 percent of Americans were surfing the Web. The level today: 87 percent. And among young adults, the Pew Research Center notes in a just-published silver anniversary report, the Internet has reached “near saturation.” Some 97 percent of Americans 18 to 29 are now going online.
Americans young and old alike are using the Web to work wonders few people 25 years ago could have ever imagined. We’re talking face-to-face with people thousands of miles away. We’re finding soulmates who share our passions and problems. We’re organizing political movements to change the world.
Life with the Web has become, for hundreds of millions of us, substantially richer. Not literally richer, of course. The same 25 years that have seen the Web explode into our consciousness have seen most of us struggle to stay even economically. The Internet and inequality have grown together.
Tim Berners-Lee never saw this inequality coming. The ground-breaking research he published on March 12, 1989, the paper that proposed the system that became the Web, carried no price tag. Berners-Lee would go on to release the code for his system for free. He didn’t invent the Web to get rich.
But others certainly have become rich via the Web. Fabulously rich. Forbes magazine last week released its annual list of global billionaires. Some 123 of them, Forbes calculates, owe their fortunes to high-tech ventures. The top 15 of these high-tech billionaires hold a collective $382 billion in personal net worth.
Numbers like these don’t particularly bother — or alarm — many of today’s economists. Grand new technologies, their conventional wisdom holds, always bring forth grand new personal fortunes for the entrepreneurs who lead the way.
In the 19th century, points out this standard narrative of American economic progress, the coming of the railroads dotted our landscape with the fortunes of railroad tycoons. In the early 20th century, the new automobile age created huge piles of wealth for car makers like Henry Ford and the oilmen who supplied the juice that kept his auto engines humming along.
Why should the Internet age, mainstream economists wonder, be any different? A new technology comes along that alters the fabric of daily life. That new technology gives rise to a new rich. The one outcome naturally follows the other. No need to get bent out of shape by the resulting inequality.
But epochal new technology doesn’t always automatically generate grand new fortunes. The prime example from our relatively recent past: television.
TV burst onto the American scene even more rapidly — and thoroughly — than the Internet. In 1948, only 1 percent of American households owned a TV. Within seven years, televisions graced 75 percent of American homes.
These TV sets didn’t just drop down into those homes. They had to be designed, manufactured, packaged, distributed, marketed. Programming had to be produced. Imaginations had to be captured. All of this demanded an enormous outlay of entrepreneurial energy.
But this outlay would produce no jaw-dropping grand fortunes, no billionaires, even after adjusting for inflation. That would be no accident. The American people, by the 1950s, had put in place a set of economic rules that made the accumulation of grand new private fortunes almost impossible.
Taxes played a key role here. Income over $400,000 faced a 91 percent tax rate throughout the 1950s. Regulations played an important role as well. In television’s early heyday, for instance, government regs limited how many commercials could run on children’s TV programming. TV’s original corporate execs could only squeeze so much out of their new medium.
And television’s early kingpins couldn’t squeeze their workers all that much either. Most of their employees, from the workers who manufactured TV sets to the technicians who staffed broadcast studios, belonged to unions. TV’s early movers and shakers had to share the wealth their new medium was creating.
Today’s Internet movers and shakers, by contrast, have to share nothing. In an America where less than 7 percent of private-sector workers carry union cards, online corporate giants seldom ever need bargain with their employees.
In a deregulated U.S. economy, meanwhile, these Internet kingpins face precious few public-interest rules that keep them from charging whatever the market can bear — and rigging markets to squeeze out even more.
And taxes? Today’s Internet billionaires face tax rates that run well less than half the rates that early TV kingpins faced.
We can’t — and shouldn’t — fault Tim Berners-Lee for any of this. He freely shared, after all, his invention with the world.
“I wanted to build a creative space,” Berners-Lee observed in an interview a few years ago, “something like a sandpit where everyone could play together.”
Some people didn’t play nice.
Isaiah Poole, Paul Ryan Misses Top Reason We Haven’t ‘Won’ the War on Poverty, OurFuture.Org, March 4, 2014. That reason: policy decisions that concentrate wealth in the top 1 percent.
Joseph Olanyo, African growth fails to bridge inequality gap, Observer, March 4, 2014. Nations need tax systems that could redistribute wealth more fairly.
J.D. Alt, Forget The 1%, New Economic Perspectives, March 5, 2014. They serve no useful social function.
Wayne Besen, Will Economic Inequality Undermine LGBT Equality? Falls Church News-Press, March 5, 2014. Growing divides spawn powerful right-wing movements that scapegoat minorities.
Kathleen Geier, The IMF (Finally) Admits That Inequality Slows Growth, Nation, March 6, 2014. Good background on an important new IMF study.
Colin Gordon, Our Inequality: An Introduction, Dissent, March 6, 2014. Exploring U.S. inequality and antidotes to it.
Yves Smith, Tax Havens Make US and Europe Look Poorer than They Are, Naked Capitalism, March 6, 2014. Around 8 percent of global financial wealth is now sitting in tax havens.
James Kwak, Posturing from Weakness, Baseline Scenario, March 6, 2014. The tax hikes on the rich in the new Obama budget: only for show?
“Make room for The Rich Don’t Always Win on your book shelf right next to Howard Zinn’s The People’s History of America.”
|NEW AND notable|
A Statistical Guide to Our New ‘Plutonomy’
Sherle Schwenninger and Samuel Sherraden, The U.S. Economy After The Great Recession, New America Foundation, Washington, D.C., March 4, 2014.
Need to better understand how the Great Recession — and the political responses to it — have played out? This no-nonsense set of slides brings together, in one place, the key trends that have defined the the U.S. economy since the Great Recession hit in 2008. Just a few of the report’s many choice tidbits . . .
Good times at the top: From 2009 to 2012, America’s top 1 percent incomes grew by 31.4 percent. Bottom 99 percent incomes rose all of 0.4 percent.
Shrinking returns to labor: From 2007’s fourth quarter to 2013’s third, the labor compensation share of national income declined from 64 to 61% percent. If this labor share of national income had remained at the 2007 level, American workers would have earned $520 billion more in 2013 than they actually did.
Enter the “plutonomy”: The U.S. economy is revolving ever more around consumption by the rich. In 2012 the top 5 percent of American income earners accounted for 38 percent of domestic consumption, up from 28 percent in 1995.