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Guest post: Who Are the 1%?

Update: Mike Konczal also takes a  look at this question in Who are the one percent and what do they do for a living.


Update 2: Another source for historical trends on inequality is at The Center for Budget and Policy Priorities

by Taryn Hart 
    
Taryn Hart publishes at her blog Plutocracy files and has interviewed John Quiggen, Bill Black, Larry Mishal to name three economists

Guest post:    Who Are the 1%?

A week or so back, Dan from Angry Bear passed along this Boston Globe article. On its face, the article bemoans rising inequality through a comparison of two Massachusetts neighborhoods: Sherborn, the State’s wealthiest neighborhood and Springfield, a former working-class neighborhood that now resembles a globalized ghost town. Although the article quotes a Sherborn resident disavowing his status as a one percenter, the piece clearly implies that the upscale Sherbornites are one percenters.
However, as Dan correctly pointed out, Sherbonites are not the one percent: The median income of Sherborn is $190,000 per year; not peanuts, I know, but the lowest paid one percenters make $500,000 per year (even using a significantly narrower definition of income, one percenters make in excess of $330,000 per year). Moreover, the biggest gains over the past thirty-odd years have gone to the top .1%.
When Occupy Wall Street identifies its opposition as the 1%, it’s not talking about people who live in posh neighborhoods with great schools; it’s talking about people who can hire teams of lobbyists who live in posh neighborhoods with great schools. As Gordon Gekko put it:
I’m not talking a $400,000 a year working Wall Street stiff flying first class and being comfortable, I’m talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player, or nothing.
And keep in mind, that’s 1980s dollars. Given the scandalous increases that have gone to the top 1% since then, the amount required to be a player these days is several times that amount. And the problem with that kind of concentration of wealth is that it inevitably undermines the incentive for collective action required for social well being.
As Matt Taibbi has pointed out in response to the one-percenter meme that those who are so poor they don’t pay federal income tax have “no skin in the game,” concentration of wealth creates perverse incentives that ensure most of the mega rich are terrible citizens:
The very rich on today’s Wall Street are now so rich that they buy their own social infrastructure. They hire private security, they live in gated mansions on islands and other tax havens, and most notably, they buy their own justice and their own government.
            *            *            *
Most of us 99-percenters couldn’t even let our dogs leave a dump on the sidewalk without feeling ashamed before our neighbors….
But our Too-Big-To-Fail banks unhesitatingly take billions in bailout money and then turn right around and finance the export of jobs to new locations in China and India. They defraud the pension funds of state workers into buying billions of their crap mortgage assets. They take zero-interest loans from the state and then lend that same money back to us at interest. Or, like Chase, they bribe the politicians serving countries and states and cities and even school boards to take on crippling debt deals.
Nobody with real skin in the game, who had any kind of stake in our collective future, would do any of those things.
Nobel Prize-winning economist Joseph Stiglitz made the same point in May of 2011 (well before Occupy Wall Street), in a must-read Vanity Fair piece entitled, Of the 1%, by the 1%, for the 1%”:
[A] modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology…. America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had.
Be clear: This is who Occupy Wall Street is talking about – the small class of people who have amassed so much wealth that they have no need for the social infrastructure that is the life blood of the 99% (even the 99 percenters who live in swank neighborhoods like Sherborn, Massachusets).
And suggesting that Sherborn is the 1% and Springfield is the 99% – when they’re both the 99% – seems designed to falsely frame the problem of inequality as the poor (Springfield) versus the well-to-do (Sherborn). Of course, in the realm of those set on denying or deflecting inequality concerns, improperly defining the opponents of the 99% is fairly mild. (See discussions of income-inequality deniers here and here). However, this particular sleight of hand has made more than one appearance of late and therefore, is worth reviewing a bit more closely.
David Brooks recently distinguished what he termed “Blue Inequality” of the mega rich from “Red Inequality,” which Brooks claims results from an education gap and is “much more important.” According to Brooks: “The zooming wealth of the top 1 percent is a problem, but it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college….”
As Dean Baker immediately pointed out, Brooks’s Blue Inequality/Red Inequality thesis is absolutely unsupported by the data:

David Brooks Complains That He Can’t Get Access to Inequality Data

Actually he didn’t complain about his lack of access to data, but he probably should have given the column he wrote today.
Let me just pause for a moment to say: Snap! Good on Dean Baker for pointing out that Brooks’s argument flat-out ignores well-known inequality data. Alright, back to Baker:
Brooks purports to lecture the Occupy Wall Street crew about how they are focused on the wrong inequality.
He tells them that that there are two inequalities in the U.S. On the one hand we have the CEOs, the Goldman Sachs crew, the lobbyists and the other members of the one percent who have done incredibly well in the last three decades. Brooks calls this the “blue inequality”….
Brooks tells us that this is less of a big deal than the red inequality, which he defines as the gap between college educated workers and those without a college degree….
This is where Brooks lack of access to data is so important….
[S]ince the 90s, the wages of workers with high school degrees have not departed much from the wages of workers with just college degrees, the vast majority of the economys gains have gone to the top 1 percent.
Despite the blatant lack of empirical support and Dean Baker’s decisive take down, Megan McArdle dutifully picked up on the trope. And, of course, the Boston Globe piece highlights the education gap between the residents of Springfield and Sherborn and implies the gap between two communities is the result of the “one percent phenomenon.” However, these arguments – and, more often, implications – are clearly undercut by the data.
The mega rich Occupy Wall Street opposes do not live in “neighborhoods,” not even well-to-do neighborhoods like Sherborn. The top 1% – and probably more accurately the top .1% – live in gated mansions with private security. As Joseph Stiglitz and Matt Taibbi have pointed out, the mega rich have reached a level of wealth that completely insulates them from society. So, don’t be fooled: Occupy Wall Street is not opposed to the affluent. Residents of Sherborn and similar affluent communities – like all citizens who still have a stake in our country’s well being – are part of the 99%.

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Occupied Media: Interview With Professor William K. Black

Often  participating in econoblogging is done by an older crowd.  I  receive requests by younger potential econobloggers to read some of their posts, but often such posts are lacking in enough documentation and thoroughness of understanding for publication here.  My hope is that this young woman becomes the exception.  Re-posted with authors permission   Dan

by Taryn Hart at Plutocracy files

Guest post:  Occupied Media: Interview With Professor William K. Black

So, this video took far too long to post due to technical difficulties (and we ultimately ended up posting without video). However, the content is amazing. The interview is with esteemed law professor Bill Black who has been a tireless advocate for reform of the financial system and prosecution of the fraudsters that brought our economy to its knees. The title of his book really says it all: The Best Way to Rob a Bank is to Own One.
 
Professor Black is an Associate Professor of Economics and Law at the University of Missouri, Kansas City, a white-collar criminologist and a former financial regulator. He blogs at New Economic Perspectives and tweets at @WilliamKBlack. Professor Black has been an advocate of the Occupy Wall Street Movement and he has been remarkably generous with his time.

A huge thanks to video editor Paul Shockey for getting this interview out despite the numerous technical problems.

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