22 August 2020   4 comments

The Institute for Policy Studies has published a study on how wealth has become increasingly more concentrated in the US since the advent of the pandemic. The data are actually astonishing:

“For the first time in U.S. history, the top twelve U.S. billionaires surpassed a combined wealth of $1 trillion.  On Thursday August 13, these 12 held a combined $1.015 trillion.

“This is a disturbing milestone in the U.S. history of concentrated wealth and power. This is simply too much economic and political power in the hands of twelve people.  From the point of view of a democratic self-governing society, this represents an Oligarchic Twelve or a Despotic Dozen….

“The Oligarchic Dozen are Jeff Bezos ($189.4b), Bill Gates ($114b), Mark Zuckerberg ($95.5b), Warren Buffett ($80b), Elon Musk ($73b), Steve Ballmer ($71b), Larry Ellison ($70.9b), Larry Page ($67.4b), Sergey Brin ($65.6b), Alice Walton ($62.5b), Jim Walton ($62.3b), and Rob Walton ($62b).

“Since March 18, the beginning of the pandemic, this Oligarchic Dozen have seen their combined wealth increase $283 billion, an increase of almost 40 percent.”

I will confess that I was an active participant in this trend. I use Facebook (Zuckerberg), Amazon (Bezos), Windows (Ballmer and Gates), Google (Brin and Page), and probably Oracle someplace on my computer (Larry Ellison). I do not, however, own a Tesla (Musk) and will never set foot inside a Walmart (the Waltons). These levels are all calculated primarily in terms of the values of the stocks these individuals hold.

There is always a discrepancy between the stock market and the goods and services economy in which most of us reside. But these discrepancies are mind-boggling and reflect the ways the political and economic institutions of the US favor those who hold capital and those who only have their labor to sell. Michael Steinberger points out the puzzling situation for The New York Times:

“The Federal Reserve was pumping more than $1 trillion into the markets to stave off a financial meltdown, and besides, with bond yields at record lows, investors didn’t really have any palatable alternatives to stocks as places to put their money. Still, it was jarring, even macabre, to watch the market soar while tens of thousands of Americans were dying of Covid-19 and millions were losing their jobs as a consequence of the nation’s economic shutdown.”

Vivekanand Jayakumar points out the risks of allowing such a discrepancy to exist and continue to widen:

“While there are rational explanations for the normal-level of disconnect between equity returns and economic performance, the current historically wide gap suggests the presence of significant distortions (unparalleled levels of monetary and fiscal stimulus) as well as heightened levels of uncertainty. A few not-so-far-fetched developments may trigger a sudden change in market sentiments: Overly-enthusiastic predictions regarding the future role of technology in our personal and work lives may turn out to be overblown, or the pace of economic recovery may not be in accord with stock market expectations, or a delay in vaccine development may occur. Entry of novice traders, an unstable political climate and upcoming U.S. elections pose additional risks.

“All in all, it would be wise to be prepared for a sudden and sharp course correction in equity markets as the disconnect between the equity market and the real economy reaches historic proportions.”

In many respects, the fact that the stock market bubble will eventually come crashing down is beside the point. The more important issue is whether a society that allows such a wide divide to exist between the rich and poor can ever achieve justice. Ultimately the chasm between rich and poor will corrode and eviscerate the pretense that “all men are created equal”.

Posted August 22, 2020 by vferraro1971 in World Politics

4 responses to “22 August 2020

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  1. The Institute for Policy Studies list of twelve richest people is interesting on a few of counts. First, only one woman on the list, Alice Walton of Walmart. No minorities. Second, with the exception of Warren Buffett (stock market investor), all of the people listed are involved in new technology based industries. Third, the Waltons are the only ones listed who could be said to have achieved their status through inherited wealth.

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    • All good observations. The second is interesting. It confirms the idea that innovation is still a vital force in the economy, yet also raises the specter of burgeoning monopoly power. We know very little about how the new technologies might stifle innovation in the future: it is hard to imagine what new company will be able to challenge Amazon. Look at the hard time Microsoft’s Edge is having to compete against Google Chrome.

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      • I’d be interested in other countries. Is the possibility of accumulating such massive wealth critical to innovation?

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      • All innovation requires some capital, but Steve Jobs, Bill Gates, and Jeff Bezos started from scratch. One doesn’t need a lot of capital in new industries.

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