November 20, 2006

Come this January, will a former secretary of the Navy under Ronald Reagan be the lawmaker who spurs the Senate to stop ignoring — and start confronting — America's grotesquely top-heavy concentration of income and wealth?

We offer a little clue in this week's Too Much. We also explore whether the free-market disciples of Milton Friedman can possibly have a clear conscience about Clear Channel, America's biggest commercial radio station empire.

Greed at a Glance: What Would Homer Say?

Versace, the world-famous Italian fashion house, is ditching its lame effort to make waves in global mass marketing and returning to its awesomely affluent roots. The company last week announced plans to ring the world with 15 “seven-star hotels.”  The first, in Dubai, will offer guests “a swimming pool with live exotic fish and specially cooled sand.” The new hotel chain will complement the fashion giant’s recent entry into what Reuters calls the “super luxury market for refurbishing yachts and private jets.” Versace, since unveiling this new service earlier this year, has refurbished two jets and three yachts — all at over $10.2 million each. Observes Versace CEO Giancarlo Di Risio: “There is a large group of very wealthy people scattered around the world.”

Some things in our world just can’t happen. Water can’t flow uphill, and a great CEO can’t ever be overpaid. Or so Wall Street power attorney Martin Lipton seemed to be arguing last week at an Investment Banking Summit in New York City. The $187.5 million the New York Stock Exchange handed Richard Grasso? Lipton’s take: “I can't think of anybody who did more for the company or institution that he headed than Dick Grasso.” The $295 million that Barry Diller pulled in last year from IAC/InterActiveCorp? Well deserved, since only a company that “prospered” could “have created that compensation.” Summed up Lipton, a legend in merger-and-acquisitions circles and now the clear front-runner for 2006 corporate apologist-of-the-year honors: “It’s ridiculous to think that someone who creates a great company isn’t entitled to having been superbly well compensated.”

The 2004 Athens Olympics now history, Greece’s economy doesn’t have much going for it these days — except gorgeous islands, thousands of them all sitting well within Greece’s territorial waters. The Greek government’s Archeological Agency used to routinely block sales of this historic real estate. But government officials are now welcoming deep-pocketed foreigners looking for their own private piece of paradise. Among the isles now on the market: Makri, a less than a square-mile speck that Homer talked up in the Iliad, and the five islets of the Echinades complex in the Ionian Sea. The complex, also less than a square mile in total surface area, figures to fetch at least $12.8 million . . .

Time, the old adage goes, is money. Maybe that’s why the latest “super cars” in the world’s priciest auto showrooms are upping the speed ante. The 2006 Ferrari 599 GTB Fiorano, starting at $255,000, can hurtle from zero to 62 mph in 3.7 seconds. But lay down just $319,000 for the newest Lamborghini, the Murciélago LP640, and you can slice the time to 62 down to 3.4 seconds. The pace of your daily grind demand even more get-up-and-go? The Bugatti Veyron can hit 62 in a mere 2.5 seconds. The price? Anywhere between $1 million and $1.4 million, depending on options. Sales revenue from these and other ultra-luxury models, Business Week estimated last week, will reach $6 billion by 2010 . . .

Back in the 19th century, notes City University of New York sociologist Frances Fox Piven, the original giants of sociology directed society’s attention to “the new patterns of inequality, hardship and disorganization” then afflicting the industrializing world. Piven, the current president of the American Sociological Association, will be devoting next year’s annual ASA meeting to that same mission. Notes the meeting’s theme: “In the United States, inequalities of income and wealth are increasing while our electoral system is degraded by money corruption, spectacle and propaganda,” creating, in the process, “policies that violate axiomatic sociological knowledge about social cohesion and stability.” Piven herself first gained national recognition, as a perceptive and provocative analyst of inequality, in the early 1970s.

Free Radio and Milton Friedman's Free Market

The “free market” lost its most celebrated cheerleader last week, with the death of 94-year-old economist Milton Friedman. Admirers immediately rushed to gush about Friedman’s pivotal role in the deregulation — the “liberation” — of America's private enterprise.

Ironically, on the same day Friedman died, almost on cue, the free market delivered a king-sized reminder of just what that “liberation” has wrought.

The reminder came via the announcement that two Boston investor groups have reached an agreement to buy up Clear Channel Communications, the mega media empire that currently owns 1,150 radio stations spread all across the United States.

Lowry Mays, the banker who founded Clear Channel in 1972, and his sons Mark and Randall figure to net $1.3 billion from the $26.7 billion deal. The six investment banks that are handling the deal — Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, Royal Bank of Scotland, and Wachovia — will likely realize $130 million in fees.

Just a dozen years ago, the thought of paydays so huge from wheeling and dealing with radio stations would have seemed an idle daydream. Radio in the United States, at the time, still operated under strict government regulations passed originally in 1934.

What happened? We have more on how the “free market” of Milton Friedman helped destroy free radio as a locally viable — and enjoyable — communications asset.

National Philanthropy Day: Why Some Never Celebrate

Last Wednesday, communities around the United States celebrated “National Philanthropy Day,” that one time a year America pauses to give special thanks to the men and women who have “donated billions of dollars to their favorite charities.”

William McGuire, the recently resigned CEO of the Minnesota-based UnitedHealth, used to stand prominently in that generosity circle. His life-time donations to charity, as of last summer, totaled nearly $100 million.

McGuire, who held UnitedHealth stock options worth $1.8 billion as of late last year, these days stands as a symbol of a different sort. The CEO stepped down last month amid charges he had profited massively from having his options “backdated.” This backdating, McGuire’s attorney acknowledged last week, may have enriched his client's personal net worth by upwards of $200 million.

Local charities, meanwhile, have no plans to shun McGuire — or his money.

“When people have been as generous with their time and money as the McGuires have,” the Walker Art Center development director noted recently, “for arts groups to not stand up with them when news flares like this would be completely wrong.”

What a difference a century makes. Back in America's philanthropic golden age, public figures routinely blasted America’s rich for giving away money they had no right to have.

A century ago, points out David Nasaw, the author of a widely acclaimed new biography of Andrew Carnegie, public figures did not automatically genuflect before the beneficence of America’s wealthiest. Methodist Bishop Hugh Price Hughes, for instance, argued that Carnegie's millions “had come at the expense of his less fortunate countrymen.”

Hughes and other leading figures of the early 20th century, says Nasaw, considered the private foundations of men like Carnegie and John D. Rockefeller “profoundly anti-democratic” institutions that “concentrated too much wealth — and power — in the hands of trustees who were neither elected nor accountable to the public.”

Those same concerns, adds Nasaw, ought to remain relevant today. We cannot be sanguine, he observes, “about a future in which billionaires play a larger and larger role in determining social policy without any say from the rest of us.”

Society, sums up Nasaw, quoting an 1891 observation from the Rev. William Jewett Tucker, a future president of Dartmouth College, can make “no greater mistake than asking charity to do the work of social justice.”

Stat of the Week: Power-Suited Bonus Babies

The five biggest securities firms on Wall Street — Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns — will hand out $36 billion in bonuses this holiday season. That’s more, notes Bloomberg analyst Christine Harper, than the annual budget of the National Institutes of Health, the federal government’s top medical research agency. More perspective: The United Nations World Food Program worked this past year to feed 79 million of the world’s poor on a budget of $3.5 billion.

Quote of the Week: James Webb, Rabble-Rouser

“The most important — and unfortunately the least debated — issue in politics today is our society's steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1 percent now takes in an astounding 16 percent of national income, up from 8 percent in 1980.”

Senator-Elect James Webb, Virginia, Wall Street Journal, November 14, 2006

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