The global spotlight shifts to Pittsburgh this week for the financial crisis summit of the 20 nations that “matter” the most economically. But other doings this week matter, too. In California, for instance, university faculty will be staging a walkout to protest the defunding that's degrading what used to be the world’s finest system of public higher ed.

The protestors include the famed linguist George Lakoff, an expert on the elements of effective political discourse. The damage inflicted on California's university system, says Lakoff, ought to have all of us asking “whether we have a democracy that works for the common good or a plutocracy that privileges the wealthy and powerful.”

Plutocracy, cloaked in the niceties of diplomatic discourse, will also be on the G-20 agenda in Pittsburgh. Several European nations will be proposing modest curbs on the banker bonuses that ignited the Great Recession. But observers give these modest proposals no chance of gaining any traction.

This sobering reality makes the latest conventional wisdom sweeping the global media — that the world’s rich have taken quite a hit over the last year — utterly astonishing. In this week’s Too Much, we have more on this new “wisdom” — and the facts on the ground this wisdom so cavalierly confuses.

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Money, billionaire Richard Branson likes to quip, really only amounts to a “convenient way of keeping score.” Today’s ultra rich are apparently hankering for some new scorekeepers. The problem: New financial products have made investing so complex that traditional money managers for the wealthy can’t tell their clients, without weeks of research, how much they’re actually worth. Enter WealthTouch, a new Denver-based “wealth reporting service” that’s currently charging 280 ultras up to $150,000 a year for a daily “total wealth picture.” WealthTouch only caters to households worth at least $100 million. A San Francisco-based competitor, Advent, counts 250 clients with net worths that range from $50 million to $5 billion . . .

The political party begun to defend Welsh language and culture, Plaid Cymru, has just resolved to advocate for a UK-wide “maximum wage.” Delegates to the party conference voted to press for a maximum — a “statutory mechanism” that would limit the gap between executive and worker pay — after Adam Price, a party representative in the British Parliament, blasted the UK’s ongoing wealth concentration. The poorest half of British society, Price noted, now holds just 1 percent of the nation’s wealth. In June elections for the European Parliament, Plaid Cymru won about a fifth of the vote in Wales . . .

Some 180 years ago, pianist Felix Mendelssohn led the revival that rekindled interest in — and appreciation for — the then nearly forgotten Johann Sebastian Bach. South African mining mogul Brian Gilbertson, taking Mendelssohn as his inspiration, is now trying to revive Fabergé, the one-time jeweler for the czars, as a 21st century world-class luxury brand. Gilbertson led a buyout two years ago that rescued Fabergé from consumer goods giant Unilever. Earlier this month, Fabergé opened anew — as a Web site, with only one actual retail location, in Geneva. Web surfers of means who express an interest in the new Fabergé will have a sales rep specially dispatched to their homes with actual product. The CEO of Gilbertson’s new Fabergé, Brian Dunhill, is feeling confident about this unorthodox approach to luxury retail. The new Fabergé, he notes, doesn’t have “to sell vast quantities of inventory.” One reason: The jeweler is hawking brooches that run $7 million each . . .

Earlier this month, in Connecticut, months of bitter legislative wrangling ended when Gov. Jodi Rell, a Republican, refused to sign or veto a budget that ups the state tax rate on income over $1 million from 5 to 6.5 percent. The budget, passed with only the votes of Democratic lawmakers, then became law — without the governor’s signature. GOP lawmakers, the Hartford Courant noted last week, based their entire budget strategy “on blocking tax increases for the wealthy.” But that strategy bombed — even with Republican voters. Rank-and-file Connecticut Republicans, says a new poll, support the higher tax rate on millionaires by a 52-46 percent margin. Overall, Connecticut voters support the increase by 74-24 percent. Connecticut millionaires, despite the tax hike, have little reason to complain. They'll still paying much less in taxes that millionaires in nearby New York and New Jersey, where the top rate sits at 8.97 percent . . .

In the midst of our current economic devastation, why aren’t more clergy talking about the greed and gluttony that helped do the devastating? The Dallas Morning News last week put that question to religious thinkers from nine different faiths. One response, from suburban Dallas rabbi Geoffrey Dennis, traced uneasiness about discussing greed to “powerful and vocal segments of our popular and political culture” that treat any questioning of the market “as political heresy, even as treason against the American project.” Episcopalian writer Katie Sherrod had a bit more cynical take. Clergy, she suggested, “do not want to risk offending or alienating their wealthy congregants.” Larry Bethune, a Baptist pastor from Austin, countered that “a vigorous conversation about greed” is taking place, “especially among those who actively minister among the poor.” Certain church sectors, he acknowledged, “ignore this dialogue.” Added Southern Methodist University analyst Matthew Wilson: “Gluttony and greed are hard, and thus often ignored, political issues precisely because we are all guilty of them.”

Quote of the Week

“We're at a point now, Jay, in this country, where the richest 1 percent, the very top 1 percent, have more financial wealth than the bottom 95 percent combined.”
Michael Moore, filmmaker, NBC Jay Leno Show, September 15, 2009

New Wisdom
on Wealth

Mark Weisbrot, The rich still run the U.S., Guardian (UK), September 17, 2009. A leading economist explores why “America's traumatic recession should have ushered in a wave of progressive political reform” but hasn't.

Billionaires Take DC: The Movie. A video look at the Billionaires for Wealthcare presence at the September 12 anti-"big government" rally in Washington, D.C.

Sick for Profit. A Brave New Films portrait of the paycheck windfalls that go to top execs at leading U.S. health insurers — and the patients who make those windfalls possible.

Les Leopold, From Fantasy Finance to Fantasy History: Wall Street Blames Government for Crash, September 18, 2009. A generation ago, Wall Street urged us to overhaul “the tax code so that wealth could accumulate at the top in order to spur entrepreneurial incentive.” Now Wall Street wants us to forget what happened next.

The Great Recession’s Phony ‘Silver Lining’

Job worries have you down? Bills piling up? Nothing left in your retirement stash? You need a reason to feel a bit better about the Great Recession, and major media outlets, over the last few weeks, have been energetically endeavoring to give one to you.

This new cascade of media retrospection began with a front-page Wall Street Journal article, picked up steam with a front-page Washington Post piece, and revved into worldwide overdrive this past week after a top wealth management consulting firm released a new report on the impact of the global economic crisis on the world’s rich.

The basic message that all this coverage is shouting: The Great Recession hasn’t been all bad. Inequality, the claim goes, is finally easing. The gap that divides the rich from the rest is shrinking — because the rich, amid the worst economic times since the 1930s, are losing significant money and power.

The wealthy are losing money, the claim continues, as asset bubbles pop and crash the value of their investments. And they’re losing power as angry lawmakers move to rein in rich people’s capacity to rebuild their grand fortunes.

Unequivocally worded headlines, the world over, are propagating this narrative of rapidly ebbing inequality: Recession hits super rich hard, Wealth inequality shrinks during financial crisis, study says, World's wealthy pay a price in crisis, Nations raise taxes, tighten regulations. The narrative, in fairly quick order, seems to be hardening into a global consensus.

“If the financial crisis has achieved one small goal,” as one Australian daily summed up last Thursday, “at least it has slightly narrowed the gap between rich and poor.”

So do we now have, at long last, a real reason to stop worrying and love the Great Recession?

Not hardly. Inequality isn’t ebbing. It’s regrouping — for a nasty upsurge. The world’s affluent have certainly lost net worth. But that loss — for the super rich — has been far more inconvenience than calamity. Average working families in the United States and throughout the world have lost far more that matters.

The rich, as Yale School of Management senior faculty fellow Bruce Judson observed last week, are “suffering relative to the past.” But average households are undergoing wrenching life changes.

“With each job loss or foreclosure,” Judson points out in a powerful critique of the Wall Street Journal’s new take on the Great Recession, “another family joins the ranks of the former middle class.”

And the actual losses the super rich have “suffered” remain inconsequential. The Boston Consulting Group study on global wealth released last week does report that households worth at least $5 million saw their net worths drop 21.5 percent in 2008. But this hefty figure mixes in together merely rich worth $5 million and super rich who consider $5 million just an ordinary year’s income.

To get a more accurate picture of what’s happening to super rich fortunes, we need to look deeper into the data, to the Boston Consulting Group study’s stats on assets held in “offshore” tax havens like Switzerland. 

The merely rich don’t stuff much cash in offshore tax havens. The super rich do. In 2007, offshore accounts held $7.3 trillion. In 2008, the new Boston Consulting Group data show, the value of the wealth “stowed away in money-havens” only dropped 8 percent.

Average working people, for their part, don’t have “money-havens” at their disposal. They have homes, and homes, not financial investments, make up the bulk of their household net worth. Home values, notes former labor secretary Robert Reich, have “taken a far bigger beating than stocks and bonds.”

On average, U.S. home prices have fallen by a third since the housing bubble popped, and, Reich adds, they're “still falling.” Stocks, meanwhile, have rallied considerably since they “hit bottom earlier this year.”

That rally has been good news for the top 1 percent of Americans — who own over one-third of the nation’s shares of stock — but not much solace to average families struggling through hard times. And you don’t have to have had your home foreclosed or your job eliminated to feel how hard these times can be.

Seventeen percent of U.S. employers, as the Economic Policy Institute reports, have recently “imposed furloughs on their workers,” and 20 percent “have suspended their contributions to 401(k)s and similar pension plans.”

“The Great Recession,” suggests Yale analyst Bruce Judson, “may be creating an even less economically equal society.”

But what about the worldwide tax-the-rich offensive major media outlets are reporting? Are governments, as the Washington Post contends, “helping themselves” to wealthy people's wallets “in a manner not seen in years”? Are financial industry movers and shakers, as the Post adds, witnessing a “government scrutiny of bankers' pay considered unthinkable before the crisis”?

On one level, these observations might possibly rate as accurate. Since the meltdown, the rich in the United States and elsewhere have come under greater pressure. But this pressure in no way amounts to “piling on when it comes to the rich.” In fact, the real news here seems to be not how much governments have done to go after the wealth of wealthy but how little.

In the United States, lawmakers have so far this year made not one move to undo the George W. Bush tax cuts for America’s wealthy. In 2009, these tax cuts for the wealthiest 1 percent alone — average income, $1.3 million — will cost the federal treasury $74 billion.

Nor have lawmakers yet moved to end the widely criticized tax loophole that lets hedge fund kingpins — the Wall Streeters who've profited the most from the “bubble economy” of recent years — pay taxes on their windfalls at a bargain-basement 15 percent.

The Obama administration, to be sure, has proposed to end both this loophole and the Bush tax cuts in 2010. But even if the White House succeeds, America’s awesomely affluent will face a top tax rate no higher than 39.6 percent. In 1980, before Ronald Reagan’s election, rich Americans faced a 70 percent tax rate on income over $400,000.

But all these numbers actually understate the gentleness of the treatment America’s wealthy — especially in the financial industry — have been receiving.

We need to keep our eye, as Laurence Grafstein noted last week in the New Republic, on the outrageous big picture: Last fall, as taxpayers poured hundreds of billions into the financial industry, the power suits who run that industry took hundreds of millions out.

The outrage goes even further than the bonuses these power suits pocketed, stresses Grafstein, a veteran Wall Street financial executive. Wall Street’s biggest banks also awarded their elites “new grants of restricted stock at historical stock-price troughs," shares now worth fortunes thanks to the taxpayer subsidies that have stabilized the stock market.

Indeed, the Institute for Policy Studies revealed last month, just 40 executives at JPMorgan Chase, Wells Fargo, and six other U.S. high-finance powerhouses have already seen the stock rewards they received early in 2009 increase in value by just under $90 million.

In the face of all this continuing — and largely unchecked greed — how should average Americans be reacting? Should we be despairing? Have we missed a once-in-a-lifetime opportunity to trim the wealthy down to democratic size?

Not yet. These things take time. The last time average Americans had an opportunity to undo enormously concentrated wealth at the top, during the Great Depression, progress didn't come quickly. The first big Depression tax hike on the rich didn’t come until three years after the Depression began.

In short, we haven’t — yet — missed any historic opportunity. We have time. We just need the will.

How to Study — and Stop — Excessive Pay

Joe Cox, Never Again! Why Britain Needs a High Pay Commission, Compass. London, September, 2009.

Last month, in an open letter published by a top British daily, 100 nationally prominent UK progressives called on their government to establish a “High Pay Commission” dedicated to launching “a wide-ranging review of pay at the top.”

Compass, the British think tank that organized this widely publicized call, has just released a paper that spells out exactly how such a commission might operate. With this paper, Never Again!, Compass has essentially handed progressives around the world a practical gameplan for challenging the “unjust rewards” that have left the developed world so dangerously unequal.

Why now for a “High Pay Commission”?

“It has never been clearer,” the new Compass paper notes, “that gross inequality damages not just those at the very bottom but all within society.”

That clarity has come, of course, from the international economic disaster that erupted last fall. Government action since then, Compass notes, has averted total global financial meltdown, but not the pain that has been visited on so many average income-earners.

Working people everywhere, the Compass paper observes, face “a long period of mass unemployment and public service cuts — in large part because those who earn the most were out of control.”

These super rich, the think tank adds, have “had a hugely destabilizing effect.” Their “short-term, high-risk” activities ended up crashing the entire global economy. The rich could do this crashing again. The culture of unlimited rewards that nurtured their reckless behavior still survives — and even thrives.

“We have witnessed the biggest economic downturn in our lifetime,” Compass points out in Never Again!, “but the structure that keeps the well-paid insulated from economic failure remains.”

Only government action can adequately shield society against a repeat meltdown. But this action needs to rest on accurate and comprehensive information that helps us understand just how excessive pay impacts society — and just how society can go about ending excessive pay.

A High Pay Commission could collect — and disseminate — that information. The commission, as Never Again! lays out in step-by-step detail, would “take evidence and make recommendations.” The commissioners, Compass proposes, would represent the economy’s major stakeholder groups: two each from corporate management, labor, the economics profession, and civil society.

The government, in the Compass blueprint, would ask these commissioners to consider a wide range of antidotes to pay excess, from top-bottom wage ratios and pay caps to higher taxes on income and speculative transactions.

The commission, after extensive public hearings, would then advance a set of final recommendations to the government for consideration and action.

A dozen years ago, a similar “Low Pay Commission” helped establish Britain’s first minimum wage. The British lawmakers, trade unionists, academics, and journalists who signed the initial High Pay Commission call in August feel their work could lead to an equally profound outcome.

That outcome, they believe, must help do more than reform high-finance.

“For decades a kind of market fundamentalism deemed that the needs of the economy and those at the top must always come first,” as Never Again! concludes. “We now know that to be disastrous — not just for society and the environment but for the effective operation of the economy itself.”

Stat of the Week

As a direct result of the current global recession, the World Bank reported last week, 89 million more people across the world will next year drop into extreme poverty — less than $1.25 of income a day. Meanwhile, says the latest annual Boston Consulting Group global wealth analysis, the world's financial millionaires last year parked $1.8 trillion worth of offshore assets in Swiss banks, 155 times more than the $11.6 billion the World Bank estimates the world's poorest nations will need next year to avoid core cutbacks in basic programs that serve their poorest families.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.