Wealth Distribution in the USA:Worse than we Imagine... Much Worse!

A revealing video with only the fault that its dismissal of socialism as equality of income is propagandist and not true. Socialism means "from each according to their ability to each according to their work", but with a much more equitable distribution of wealth than under capitalism, and so approximating more to what the film depicts as the average US citizen's idea of an ideal distribution.

Many American Senior Citizens Die With Little or Nothing

About 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die. Most of them rely on Social Security payments as their means of support. That is why Americans worry about not having enough money to live on in old age. Many of America’s old people have few savings in bank accounts, stocks and bonds, and die with almost no financial assets. It means seniors have can hardly withstand financial shocks, such as expensive medical treatments that may not be covered by Medicare or Medicaid, or other unexpected, costly events. James Poterba, the Mitsui Professor of Economics at MIT who studied the wealth of elderly Americans, said:

There are substantial groups that have basically no financial cushion as they are reaching their latest years.

The study, which also involved Steven Venti of Dartmouth College, and David A Wise of Harvard University, was among the few that have examined the economics of aging in the US, revealed a diversity of outcomes among senior citizens, and that the single elderly fared worse than married couples. While attention has been paid to how much wealth people needed to accumulate by the time of their retirement, this study focused on how that wealth panned out during retirement—right up to death.

Between 1993 and 2008, unmarried older people a year before they died had median wealth of about $165,000, including current and future Social Security income, job-related pension benefits, home equity and financial assets. In the same period, the median wealth for continuously married senior citizens, roughly a year before they died, was more than $600,000. Poterba says:

If we were to substantially reduce Social Security benefits for those later in life, there is a share of the elderly households for whom that would translate very directly into reduced income, because they seem to have accumulated little in the way of financial resources.

The work used data collected in the Health and Retirement Study (HRS), a continuing survey of people through their retirement, sponsored by the National Institutes of Health and based at the University of Michigan.

Poterba, Venti and Wise studied people who were older than 70 in 1993 when the HRS began, until the end of 2008. People were surveyed every two years, which averaged out to a year before the deaths of all those who died in the study period. Three main paths are possible in the years before death with different financial outcomes:

1. those consisting of one person who remained single until death
2. married people who outlive their spouses and die single
3. married people who die before their spouses.

Married couples are better able to mitigate the financial burdens of old age. Among retirees in the study, 52 percent who were single had annual incomes of less than $20,000 and less than $10,000 in other financial assets. In contrast, just 36 percent of single people who started out in two person households at retirement fell below those levels, and only 26 percent of people in two person households fit that description.

The study found a strong correspondence between wealth in 1993 and the length of time that people lived. That relationship held true across a variety of asset classes. People whose homes were worth more, who had larger retirement incomes, and who had more financial savings all tended to live longer than those who had fewer assets. Poterba observes that patterns of health status in these years are quite persistent. Better off senior citizens are healthier and live longer.

The paper has been praised by other researchers. David Laibson, an economist at Harvard, calls it “a terrific paper, which should have a significant impact on our national conversation about savings adequacy”. Laibson suggests that the replacement of “fixed benefit” retirement plans with plans subject to market fluctuations means that the financial situation for some seniors “is likely to get even worse in the years ahead. … For many reasons, especially pre-retirement leakage and poor stock market returns, households are accumulating far too little wealth in their 401(k) plans”, though many who end up in the bottom in tier of income, when they are very old, are folks who were probably not covered by defined-benefit plans during their working lives in any event.

The Upper Classes are More Dishonest—Official!

A series of studies conducted by psychologists at the University of California, Berkeley and the University of Toronto in Canada and reported by the NSF reveal something the well off may not want to hear. Those who are relatively high in social class are more likely to engage in unethical behavior. Lead researcher Paul Piff of UC Berkeley said:

Our studies suggest that more positive attitudes toward greed and the pursuit of self-interest among upper class individuals, in part, drive their tendencies toward increased unethical behavior.

Relative to the lower class, the upper class are more likely to break the law while driving, more likely to exhibit unethical decision-making tendencies, more likely to take valued goods from others, more likely to lie in a negotiation, more likely to cheat to increase their chances of winning a prize and more likely to endorse unethical behavior at work.

Piff explained:

The relative privilege and security enjoyed by upper class individuals give rise to independence from others and a prioritization of the self and one’s own welfare over the welfare of others—what we call greed. This is likely to cause someone to be more inclined to break the rules in his or her favor, or to perceive themselves as, in a sense, being “above the law”.

They therefore become more likely to committing unethical behavior.

Procedures

Piff and colleagues conducted seven survey, experimental and naturalistic studies to determine which social class is more likely to behave in unethical ways—to engage in behaviors that have important consequences for society such as cheating, deception or breaking the law.

In two naturalistic field studies that examined unethical behavior on the road, researchers were surprised by the differences between upper and lower class people, finding upper class drivers were significantly more likely to pursue their own self-interests and break the law while driving than were lower-class drivers. In these studies, the researchers defined social class by an observable cultural symbol of social class—namely, their car. Drivers of higher-end automobiles were four times more likely to cut off other vehicles before waiting their turn at a busy, four way intersection with stop signs on all sides. In addition, they found upper class drivers were significantly more likely to drive through a crosswalk without yielding to a waiting pedestrian.

In another laboratory study, the upper classes were more likely to cheat to improve their chances of winning a cash prize. Piff and colleagues first measured social class using the MacArthur scale of subjective socioeconomic status, where participants rank themselves on a 10-rung ladder relative to others in society in terms of their wealth, education and the prestige of their jobs. Participants then played a “game of chance” in which a computer presented them “randomly” with one side of a six-sided die on five separate rolls. Participants were told higher rolls would increase their chances of winning a cash prize, and were asked to report their total score at the end of the game. In fact, die rolls were predetermined to sum up to 12. The extent to which participants reported a total exceeding 12 was a direct measure of their cheating. The researchers concluded greed was a “robust determinant of unethical behavior”.

Plato and Aristotle deemed greed to be at the root of personal immorality, arguing that greed drives desires for material gain at the expense of ethical standards.

Due to their more favorable beliefs about greed, upper class people are more willing to deceive and cheat others for personal gain.

Study 4 sought to provide experimental evidence that the experience of higher social class has a causal effect on unethical decision-making and behavior. It was the only study in which researchers manipulated participants into temporarily feeling either higher or lower in social class rank to test whether these feelings actually caused people to behave more or less unethically.

At the end of the study, the experimenter presented participants with a jar of individually wrapped candies, ostensibly for children in a nearby laboratory, but informed them that they could take some if they wanted. This task served as a measure of unethical behavior because taking candy would reduce the amount that would otherwise be given to children. People in this study, who were made to feel higher in social class rank, took approximately two times as much candy from children than did people who were made to feel lower in social class rank. Piff concluded:

Across all seven studies, the general pattern we find is that as a person’s social class increases, his or her tendency to behave unethically also increases.

The Ultra-rich—Intelligent? Talented? No, Lucky and Brutal

The ultra-rich 1% claim that they have unique qualities that explains why they are where they are—among the ultra rich. They credit themselves with success for which they were not responsible. Many got certain richly rewarded jobs by a ruthless greed or by being born to the right parents, talents that they would rather not boast about, so they claim it is intelligence, creativity, hard work, enterprise or acumen, much more acceptable talents.

In findings that have been widely replicated, psychologist, Daniel Kahneman, winner of a Nobel economics prize, studied for eight years the results of 25 wealth advisers. Their average performance was zero, but, when their results were above average, they got bonuses. Traders and fund managers across Wall Street had their massive compensation for success hardly or no better than random. Doubtless they got bonuses even when they did badly because everyone is allowed to have a bit of bad luck! Surprise, surprise, the city slickers did not want to hear Kahneman's findings.

So much for the financial sector and its super-educated analysts. As for other kinds of business, you tell me. Is your boss possessed of judgement, vision and management skills superior to those of anyone else in the firm, or did he or she get there through bluff, bullshit and bullying?

In another study “Crime and Law”, Belinda Board and Katarina Fritzon psychologically tested 39 senior managers and CEOs of leading British businesses, then performed the same tests on patients at Broadmoor hospital, a mental hospital for convicted criminals too insane for prison. On certain criteria, the manager’s scores matched or exceeded those of the criminally insane patients, beating even some psychopathic patients. These criteria are just those which closely resemble the characteristics that companies look for in managers. Some are:

• their skill in flattering powerful people to manipulate them
• egocentricity
• a strong sense of entitlement
• a readiness to exploit others
• a lack of empathy and conscience.

Paul Babiak and Robert Hare also point out in their book Snakes in Suits, that psychopathic traits are more likely to be selected and rewarded in modern management. So, while those with psychopathic tendencies born to a poor family are likely to go to prison, those with psychopathic tendencies born to a rich family are likely to end up as top managers. CEOs now take from their businesses “rewards” disproportionate to the work they do or the value they generate. Business has been rewarding the wrong skills.

The über-rich are called the wealth creators, but they have preyed upon the earth’s natural wealth and workers’ labour and creativity, impoverishing both people and planet. Now they have almost bankrupted us. The wealth creators of neoliberal mythology are actually wealth destroyers. In the US:

• between 1947 and 1979, productivity rose by 119%, while the income of the bottom fifth of the population rose by 122%
• between 1979 and 2009, productivity rose by 80% , while the income of the bottom fifth fell by 4%
• in roughly the same period, the income of the top 1% rose by 270%.

In the UK:

• the money earned by the poorest tenth fell by 12% between 1999 and 2009, while the money made by the richest 10th rose by 37%
• The Gini coefficient, which measures income inequality, climbed in this country from 26 in 1979 to 40 in 2009

The undeserving rich are now in the frame, and the rest of us want our money back.

George Monbiot

George Monbiot writes, usually excellently penetrative articles, in The Guardian and on his own website. In the article above, his latest (8 November) essay is summarized in slightly edited form. See the originals at the link given here, or at The Guardian.

The Banker by C-J Moncur

The Banker

Hello, my name is Montague William 3rd
And what I will tell you may well sound absurd
But the less who believe it the better for me
For you see I'm in Banking and big industry

For many a year we have controlled your lives
While you all just struggle and suffer in strife
We created the things that you don't really need
Your sports cars and Fashions and Plasma TV's

I remember it clearly how all this begun
Family secrets from Father to Son
Inherited knowledge that gives me the edge
While you peasants, people lie sleeping at night in your beds

We control the money that controls your lives
Whilst you worship false idols and wouldn't think twice
Of selling your souls for a place in the sun
These things that won't matter when your time is done

But as long as they're there to control the masses
I just sit back and consider my assets
Safe in the knowledge that I have it all
While you common people are losing your jobs

You see I just hold you in utter contempt
But the smile on my face well it makes me exempt
For I have the weapon of global TV
Which gives us connection and invites empathy

You would really believe that we look out for you
While we Bankers and Brokers are only a few
But if you saw that then you'd take back the power
Hence daily terrors to make you all cower

The Panics the crashes the wars and the illness
That keep you from finding your Spiritual Wholeness
We rig the game and we buy out both sides
To keep you enslaved in your pitiful lives

So go out and work as your body clock fades
And when it's all over a few years from the grave
You'll look back on all this and just then you'll see
That your life was nothing, a mere fantasy

There are very few things that we don't now control
To have Lawyers and Police Force was always a goal
Doing our bidding as you march on the street
But they never realise they're only just sheep

For real power resides in the hands of a few
You voted for parties what more could you do
But what you don't know is they're one and the same
Old Gordon has passed good old David the reigns

And you'll follow the leader who was put there by you
But your blood it runs red while our blood runs blue
But you simply don't see its all part of the game
Another distraction like money and fame

Get ready for wars in the name of the free
Vaccinations for illness that will never be
The assault on your children's impressionable minds
And a micro chipped world, you'll put up no fight

Information suppression will keep you in toe
Depopulation of peasants was always our goal
But eugenics was not what we hoped it would be
Oh yes it was us that funded Nazis!

But as long as we own all the media too
What's really happening does not concern you
So just go on watching your plasma TV
And the world will be run by the ones you can't see

Written By Craig-James Moncur
16/10/2009

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GBS—Just What is the Point of the Rich?

Taxation of the poor and cuts in public spending by cutting government expenditure causes personal suffering among those who have to live off smaller take home pay, or who lose their jobs. The unearned income from returns on stocks, profits, bonuses and commissions—the ways the rich maintain their wealth—is treated “as so sacred that we must all tighten our belts sooner than touch it” (GBS). The media pundits and tame academics employed by the wealthy class explain to us that we need the investments of these rich people to replace and accumulate capital, without which we would have no industry at all. So we have to let this narrow class of super rich have so much money that it is quite impossible to consume, leaving them with no alternative but to invest it:

After stuffing themselves with every luxury that can be imagined on the face of the earth, they still have millions which save themselves because they cannot be spent. That is the argument for having an enormously rich class amongst you. What have we to say to that?

In the first place, it is an enormous waste to overfeed a handful of idle people and their millions of hangers on before you can save money when no money need pass through their hands at all. No sane nation, which could accumulate its capital in any other way, would chose that way. Well, what on earth is to prevent us from accumulating our capital in another way? Why not take its sources out of the hands of these gentlemen and accumulate it ourselves? They would then have to work for a living, but we would all be the richer and they all the happier.

G B Shaw, In Praise of Guy Fawkes, 1932

After all, they are always telling us that work is good for us, so they must be all the happier to be able to join with us in doing it, those of us, that is, who have jobs in the first place. But we will be able to sensibly organize employment by looking to rebuilding our decayed cities and providing better public amenities, thereby employing many who at present have no jobs and live in derelict inner cities despairing for the future of their kids who know nothing but the local drug baron.

Then again, what guarantee have we that these people will invest their surplus cash for the good of the nation? As a rule they send it wherever labor is cheapest, anywhere in the world except the USA.

Here we are with our cities rotted out with slums, and with the most urgent need for capital to do away with those slums and to improve the condition of our people, to give them better food, better clothing, better housing, and better education, for bringing our obsolete machinery up to date, organizing agriculture collectively, and introducing all the new scientific methods. We need capital for those things, but if there is a penny more in the way of dividend to be got by our capitalist class by sending money to the Argentine or anywhere else, they send it there.

G B Shaw, In Praise of Guy Fawkes, 1932

In the present day, China has vast amounts of US dollars. By controlling the release of these dollars on to the market, the Chinese can control the US economy, making exports expensive and imports cheap, perhaps, with disastrous consequences for home industries. What do the super rich class care? They bother only about their investments which make their money abroad anyway, so the US economy scarcely matters to them.

So you see the one defense you can set up for the conspiracy of silence about unearned income is nothing but a silly excuse for shirking the great enterprise of Socialism. It is not true that wages must be cut, public enterprises much be starved and stopped in order that more hundreds of millions can be added to those that are being wasted at present on idleness, extravagance and corruption of labor which are ruining us.

G B Shaw, In Praise of Guy Fawkes, 1932

As to innovation, it is true that private corporations have developed wonderful technological advances, but very much of the original scientific priming behind it is financed by the state not by the idle rich who too often consider it far too chancey to finance research, and then government contracts often under the auspices of the military are often necessary to encourage the private corporations to do anything towards technological development. In short, risk avoidance actually holds back progress when investment is in private hands. The rich look for security nowadays not enterprise. It is the small independent businessman, rising from the working and middle classes, who is often the entrepreneur, and they frequently have problems raising funds for start ups and growth.

Warren Buffet Says Squeeze the Mega Rich

We have noted elsewhere in this Blog that professor Greg Philo found some rich people—the intelligent ones—were willing, even glad, to pay additional tax if it meant greater economic and social stability in the nation and the world. Now, Warren Buffet, whose net wealth is valued at around $50 billion, in The New York Times has lashed out at Congress, saying that they were not handling tax breaks in a way that is best for the country. He called for higher taxes for the super rich of America, himself included.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we megarich continue to get our extraordinary tax breaks. These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species.

While he paid nearly $7 million in taxes last year, he should have forked over much more to the federal government but tax breaks kept him from doing so, he wrote. “It's nice to have friends in high places”, but Congress need not “coddle” the super rich any longer.

GBS—What Obama Should Have Done in the Face of Congressional Budget Opposition

…the existing system is in essense nothing but a gigantic robbery of the poor. what is the matter with society is that the legal owners of the country and its capital are getting for nothing whatsoever an enormous share of the wealth produced from day to day in this country… balancing the Budget or forming a Budget was simply this: how much money can we get out of the people?

G B Shaw, In Praise of Guy Fawkes, 1932

Of course, when all the measures directed at the poor are insufficient, a capitalist President and Congress have to consider taxation of the rich, who will never consent until the politicians have convinced them that every last dime has been screwed from the people. Today, they are even greedier and more unreasonable than they were in the 1930s, and we know how they ended!

If Obama were a socialist, having no socialist majority in Congress, according to Shaw, he ought to have resigned in the face of the idiotic Congressional Republican opposition. He should have said:

Very well, I resign, so you Republicans take this budget in hand yourselves. I know perfectly well that you will do everything you can to get the money without coming down on the rich. You will cut services and amenities, and tax every dime of earned wages and nothing or as little as possible on unearned incomes. You will pretend that the US of America will be communistic if a dime of the vast wealth of the rich is conscripted on behalf of the country, and will continue in the face of the dire situation to leave the rich all their tax breaks and bacon lard.

You will not mention what sum of money those tax breaks mean to the treasury, and therefore to the people, nor what the treasury could raise if the rich were obliged to pay tax even at the same rate as the poor, let alone the higher rates that are justified. The poor will spend their money here in the US, creating jobs for others, and demanding goods and services boosting our economy. The rich spend and invest much of their money abroad, depriving the US of jobs, goods and services, and breaking communities in the process.

Very well, serve the rich according to your traditions, and take the plaudits of success or the consequences of failure. I am not in on this deal. My conscience is clear.

LA Dodgers a Microcosm of American Society

The LA Dodgers are bankrupt. They do not have the cash to pay their employees’ wages. We are talking about a community here. The Dodgers are a baseball team much loved by its many patrons, as sports teams usually are, whether big or small. And the Dodgers are bankrupt despite recent success—they made the play offs as recently as 2008 and 2009. Why then has this catastrophe engulfed the team? Andrew Gumbel of the UK Observer has explained it.

The fact is that the owner of the team has sucked them dry for his own aggrandisement. It should be a lesson for Americans, especially those who persistently defend the mega rich, people whom they do not know and never will, and people who are richer than they can ever imagine—America’s plutocrats, the corrupt and greedy rich.

Frank McCourt, not the deceased Irish novelist but a car lot magnate, bought the team and bled it dry to support a life of luxury for himself and his family. McCourt bought the Dodgers from News Corp, who had used it to build up a regional sports network. To do it, McCourt borrowed $150m from Bank of America, $75m from Major League Baseball and $196m from Fox, so he had not spent a penny of his own money.

McCourt then sliced off what was most profitable, the stadium car park and the ticket office as his own operations, which charged the Dodgers rent, and, in turn, giving McCourt security to borrow more dollars. He paid himself $5m a year, his wife, Jamie, $2m pa as chief executive, and their two children $600,000 each—one was a student at Stanford University and Goldman Sachs employed the other. McCourt also enjoyed a private jet and four luxurious houses in Hollywood and Malibu. In typical robbing financier style, the money and debt were spread among, and constantly moved between McCourt’s shell companies and subsidiaries to hide what was going on.

And what was going on was that the assets of the team were being stripped and moved into the personal accounts of a single family and a few hangers on.

Yes, it ought to be a lesson for the average American, whether poor and unemployed or middle class and imagining that they are well off. You just do not have a clue, especially you Tea Partiers taken in by rich men’s stunts to keep you on side. The invisible über rich of the USA are taking you all for the same sort of ride as McCourt took the community that supported the LA Dodgers. They are robbing you silly, and too many of you are defending them!

You cheer because they are sending your boys to distant lands to get maimed and killed, and they make money out of armaments and the vast support industry of the military-industrial complex that supports it. Often you don’t even get a badly paid job out of it. They manufacture more and more abroad in low cost countries. You lose your jobs, or the threat is used to keep wages down or to get concessions from the city and the state treasury, and all of it goes into pockets just as McCourt’s did. You don’t know what is going on because they are like McCourt experts in hiding it, and have a gigantic publicity service called the media to feed you anything to keep you confused and divided.

Get real! You Yankees are like the Dodgers fans—being conned!

Why Are Wealthy Countries Smart Countries?

A press release of the Association of Psychological Science tells us that Heiner Rindermann of the Chemnitz University of Technology and James Thompson of University College London have analyzed test scores from 90 countries, from the US to New Zealand, and Colombia to Kazakhstan, and found that the intelligence of the people, particularly the smartest 5 percent, is a factor in the strength of their economies.

They also collected data on the country’s excellence in science and technology the number of patents granted per person and how many Nobel Prizes the country’s people had won in science.

They found that intelligence made a difference in gross domestic product. For each one point increase in a country’s average IQ, the GDP per capita was $229 higher. For every additional IQ point in the smartest 5 percent of the population, a country’s per capita GDP was $468 higher. Rindermann says:

Within a society, the level of the most intelligent people is important for economic productivity. I think in the modern economy, human capital and cognitive ability are more important than economic freedom.

The press release is inadequate, admittedly, but the obvious criticism in the way these data are presented is that it is a typical chicken and egg question. IQ is not solely intrinsic, it can be trained, and nothing suggests that intelligence is the independent variable, and economic success the dependent one. It could be the exact opposite. Economic success provides some people with a surplus that they can use to recruit able people into their businesses, and educate their own children to a higher standard than ordinary workers. They can also marry their daughters to the most successful of their employees. Through successive generations, then, the ruling elite get cleverer and better educated.

Meanwhile successful managers who did not marry the boss’s daughter can launch businesses of their own, and when successful, can join the ruling elite. This latter is, of course, the American Dream, but it gets harder and harder for anyone actually to go from rags to riches via enterprise. Startup costs are prohibitive in a technological age unless someone is willing to sell their idea to a rich man called a “venture capitalist”. The entrepreneur from then on is no longer his own boss. The megarich insulate themselves from failure by buying the best ideas from potential rivals, employing clever managers and lawyers to preserve their wealth for them, and bribing politicians to wangle the political and economic system to suit them.

So what is the chicken and what is the egg? As ever the rich have grabbed all the best seats, and they are not going to give them up. They think they’ve paid for them. They will!