The Real Winners Of The Recovery: The Superrich
Much has been made of the yawning gap between the 1% and the 99% and that America is by and large a plutocracy. But inequality is also expanding within the commanding heights of the US economy as new research shows that the top .1% has broken away from their uber-wealthy peers and amassed more than 22% of the wealth . In other words, the top one-thousandth of the country controls one-fifth of the wealth.
There are both short term and long term trends that led to this highly stratified economy. The short term trend is, obviously, the financial bailouts. The top 1% and .01% own a disproportionate amount of financial assets such as those saved and augmented by TARP. The average American has a tangential relationship with the stock market or financial markets generally. The overwhelming amount of activity is generated by and for the rich and superrich which is why the Dow Jones Industrial Average (DOW) is a terrible indicator for general prosperity – the measure is nearly irrelevant to the lives of average people except when it crashes.
The long term trend exacerbating wealth inequality is the structure of compensation for corporate executives. Corporate executives are now siphoning off more and more of a firm’s wealth while the pay of the average worker is treading water.
If the ultra-wealthy are worth that much, the idea goes, it’s just a fair valuation of their contributions to the market. But rocketing compensation and increased concentration of wealth in the stock market aren’t necessarily an indicator of performance. According to the AFL-CIO, the CEOs of S&P 500 Index companies made, on average, $12,259,894 in 2012, or 354 times that of the average rank-and-file U.S. worker. Meanwhile, in Japan, the average CEO earned $2,354,581 in 2012, or 67 times what his or her average worker earned.
There is an even more subversive aspect to this trend. By denying workers pay gains and redistributing wealth up to executives the superrich have forced the lower classes to borrow money to maintain a lifestyle they could maintain previously through saving. That borrowing placed more Americans into debt and pumped up credit bubbles – bubbles also pumped up by executives who have nowhere to put their money except the financial markets after hitting their own consumption limits. It’s a perverse system especially when you remember that when those bubbles pop it is the superrich who get the bailout.
And if the current data is any indication we are getting ready to do it all over again.