Where is All the Money? Ask Credit Suisse Bank!

Sam Pizzigati, editor of Too Much, an online newsletter on excess and inequality, reports that the Swiss banking giant Credit Suisse has issued for the first time a Global Wealth Report based on financial data from over 200 countries. It shows that total global net worth, despite the 2008 global economic meltdown, has rocketed up 72 percent since 2000. Credit Suisse sums up:

The past decade has been especially conducive to the establishment and preservation of large fortunes.

The world has more than enough wealth to ensure no one on the planet need be potless. The study shows the world has 4.4 billion adults and the total wealth they own is $194.5 trillion. Shared out, every adult in the world could have $43,800. The fact is, though, that three billion people, almost 70 percent, have less than $10,000, and 1.1 billion, a quarter of all adults, have less than $1,000. These figures are net worth, meaning their assets less their liabilities. Half the people on earth who are 20 and older have less than 2 percent of global wealth—each less than $4,000.

The world’s richest 1 percent—adults who have at least $588,000—hold 43 percent of the world’s wealth. They constitute the ruling class, the wealthiest class, and they break down as:

• just over 1,000 billionaires, with over $1000 million each
• 80,000 more super rich people worth between $50 million and $1 billion each
• 24 million more people who are millionaires worth between $1 million and $50 million.

Those wealth differences are exacerbated by the local conditions. In uncivilized societies with poor public health care, poor quality public education, and no state pensions, then the poor are hit by ill health, a miserable old age, and ignorance because they cannot afford to pay for the absent public services. Moreover, epidemics like swine flu, natural disasters, like Katrina, and unemploment are additional shocks for which the poor do not have the reserves to survive easily. In a society with the opposite conditions, a history of civilized caring governments which have provided public services and benefits then poverty does not have the stigma and practical horrors it has in poor societies.

No other nation has as much total wealth as the United States, with only 5.2 percent of the world’s population. It has 23 percent of the world’s adults worth at least $100,000 and an even greater proportion, 41 percent, of the world’s millionaires. Yet, it is a society with inadequate social services, so its people need more personal wealth to survive than people in countries like France, Sweden and Germany which have good social services.

Canada has a national public health insurance. Credit Suisse calculates the wealth of the typical Canadian family is $94,700, double the $47,771 US average. It shows that good public services add to a nation’s wealth. Public services provide jobs, and need private business suppliers, and health and pension security means people are less risk averse, and will be more inclined to start up new businesses.

Why then have we given trillions of dollars to the banks, depleting our treasuries so much that we are told we have been living too extravagantly? It is a big lie, and we ought to be taking direct action to change it. But we can do without Tea Party economics. We do not need tax cuts for the rich, we need services for the poor, paid for by taxing the rich. They can afford it, we cannot!

Gambler’s Psychology among Bankers Demands Tight Regulations

Dr Paul Crosthwaite, an academic at Cardiff University, has found that the bankers who brought the global economy to its knees two years ago may have enjoyed the sensation of losing hundreds of billions of pounds and plunging the world into recession. He argues such catastrophic losses can give some people masochistic pleasure.

He thinks financial crises, such as the “Black Monday” crash of 19 October 1987, the bursting of the dotcom bubble in the spring of 2000, and the credit crunch that entered into its most intense phase in the autumn of 2008 with the nationalization of banks in the UK, US, and Europe, demonstrate the innate urge for self destruction that Sigmund Freud called the “death drive”. A full blown crash is a source of euphoria as much as despair. Dr Crosthwaite said:

Economists and financial policymakers must recognize that investor psychology is far more complex than their models have allowed up to now. They need to take much greater account of psychological factors such as emotion and desire, which affect how market actors behave in profound ways.

His research challenges the conventional economic thinking that investors are wholly rational, and always pursue whatever is most likely to increase their own wealth, a rarely questioned assumption that is the basis of the free, minimally regulated market of standard capitalist thinking. In fact, financial markets are disposed to crisis because participants seek excess for thrills as well as their assumed betterment. Bankers and financiers take risks not only for high returns, but to get a gambler’s high.

Dr Crosthwaite says this research strengthens the case for firm regulation of banks and other financial institutions:

To avoid a repeat of the great recession, it is vital that policy makers and regulators limit the capacity of financial professionals to engage in excessive practices by curbing the disproportionate levels of risk that we’ve seen in the financial sector in recent years.

Media Manipulation of the Poor Prevents Wealth Redistribution

Nate Kelly, a professor of political science at the University of Tennessee, Knoxville, and Peter Enns of Cornell University studied of economic inequality and public views of government redistribution programs by analyzing hundreds of thousands of responses to survey questions from 1952 to 2006.

The results are very revealing about the mentality and conditioning of poor Americans, and poor Americans certainly now includes a large chunk of people who like to consider themselves as middle class! One would imaging that people struggling in hard economic circumstances would appreciate government assistance, but they do not in the US. Kelly found:

When inequality in America rises, both the rich and the poor become more conservative in their ideologies. It is counterintuitive, but rather than generating opinion shifts that would make redistributive policies more likely, increased economic inequality produces a conservative response in public sentiment.

As the rich get richer and the poor get poorer, both oppose government welfare programs. At present, in the US, governments cannot act to change inequality. As Obama is finding out, the poor even oppose measures that help them! Poorly off subjects, asked if they thought the government spent too much money on welfare, inevitably replied “yes”, and still do even though inequality over the last few decades has zoomed in the US.

This isn't because are unaware. They know about the huge wealth differences in the US. The reason is, the authors conclude, because the elites, political leaders and media moguls, distract and shape public opinion. In good economic times the media focus on individual achievement, and so the poor resist government programs. But in bad economic times, the media emphasize government welfare programs as handouts, and no one likes a self image of being a beggar or a hobo down on their luck. Kelly observes that:

What is clear from our work is that the self reinforcing nature of economic inequality is real, and that we must look beyond simple defects in the policy responsiveness of American democracy to understand why this is the case.

He means, of course, that leaders like Obama who would like to redistribute the huge inequalities in US wealth have not been utterly lacking in the US, but the US propaganda machine is so successful that too many people just cannot bring themselves to admit they would welcome it. They are conscious enough about their own poor circumstances, but simply do not realize how the US media manipulate them. Obama and anyone equally public minded are bound to lose until poor Yankees realize the rich and their media are pissing on them from a great height!

Stop the Afghan War—Save our Public Services and Jobs

Dozens of soldiers are spilling out of choppers around the villages. The insurgents are on their radios, getting ready to strike. [Captain] Dan is not going to let them, and soon the night sky lights up with air strikes, gunships, rockets and bombs. Around dawn, Dan's lieutenant radios. He is with the village elder. There are five dead and 11 wounded women and children. Dan is depressed. he wants to go down and explain. He wants the villages to know there were bad guys there… NYTimes, writer, Elizabeth Rubin

Rubin asked Captain Dan whether he knew this would happen. “Yeah, I did”, he replied. She adds that his choice was “my soldiers or the Afghans”.

Rubin is content to leave it at that, but Captain Dan was attacking Afghan people, men, women and children in their own homes in their own villages, and to Captain Dan—doubtless one of our heroes—the Afghan men, by defending their homes and families, are defined as being “bad guys”. Naturally, the Afghans, defending what is theirs, do not realize they are bad guys at all and have to have it explained to them—if they are still alive!

Is it right that we should be killing people in their own homes, thousands of miles away from our own homes, because our odious and gruesome leaders have decided that they are bad guys who will kill us in our beds if we do not kill them in their beds first? It plainly is not. The enemy has metamorphosed from being international terrorists, Al Qaida, to being the Taliban, a local Moslem sect who had nothing to do with 9/11! They are the heroes, not our brave boys. Our brave boys are the bad guys, by any standard of morality. Which one of us would not defend our own homes if we were placed in the situation the Afghans have been put in? The Americans did it against the British. Why then are they objecting to others doing the same? Why are they acting as imperialists, like king George's British? Are they hypocrites?

Stop the War!

Incidentally, the UK’s heroic Christian leader, Dr Gordon Brown, says he will spend an extra £5 billion on the war next years, yet he is cutting public services and sacking people allegedly to save a few million pounds. Are our leaders insane idiots, or do they just take us to be? Do not vote for a war party!

Atlas Shrugged, so Blame the Poor!

Ayn Rand emigrated from the Soviet Union to the US, then wrote her magnum opus, Atlas Shrugged, in 1957. It is a paeon of praise to libertarian individualism, rational self-interest, and laissez-faire capitalism. She considered her 1200 pretentious pages to be the core of her “philosophy” of “objectivism”. The novel is set in a dystopian USA. Furious at being exploited by a society depicted as bleeding them dry with taxes and regulations on behalf of the masses (“parasites” and “moochers”), industrialists and corporate bosses “stop the motor of the world” by going on strike. To let the weak see they can never cope when the elite withdraw their labour, the striking “men of the mind” (inventors, entrepreneurs, and industrialists, so read capitalists) retreat to a camp in the mountains of Colorado protected by a special shield. In the freedom of their mountain hideaway, unregulated and untaxed by government, they build an independent economy free from the imperatives of human society like compassion, justice and mercy! Starved of their genius, society collapses, wars break out and eventually the bureaucrats beg the rebel leader, John Galt, to take over. So Rand believed the whole world would collapse unless the “best people” are allowed to be as selfish as they like. Curiously, she writes:

It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.

It sounds almost communistic. If there are no masters, then there are no slaves, but the message of her writing is that the masters must be allowed to remain masters, and untrammelled by any concern for the wretched. Slaves must be slaves forever! It is all they are good for. Rand believed that altruism was evil. So any redistribution of wealth, even voluntarily, is weakening to society. How can such a vision be anything other than Nazi? Rand’s vision of the world in Atlas Shrugged inspires either slavering devotion or disbelieving ribaldry. Leading philosophers ignore it as puerile. Noam Chomsky even called her “one of the most evil figures of modern intellectual history”. But Rand’s adherents see parallels in today’s economic events. Faced with Obama's Keynsianism, the thought of a right wing strike has its sympathisers among the caste of Republican politicoes on Capitol Hill. Some foresee a Rand revolution, in which those unwilling to pay their taxes decide to “do a Galt”, arrange a strike of the wealthy. Obama’s policy of creating work by injecting cash into the economy, they argue, smacks of socialism, forcing the strong and successful to prop up the weak, feckless and incompetent. Business commentator, Stephen Moore, wrote in the Wall Street Journal:

The current economic strategy is right out of Atlas Shrugged. The more incompetent you are in business, the more handouts the politicians will bestow on you.

The Republican congressman, John Campbell, told The Washington Independent:

People are starting to feel like we’re living through the scenario that happened in Atlas Shrugged. The achievers are going on strike. I’m seeing, at a small level, a kind of protest from the people who create jobs… who are pulling back from their ambitions because they see how they’ll be punished for them.

They cannot mean the bankers! Among the bankers, brokers and industrialists, whose greed brought on this recession, were adherents of Rand’s ideas, like Alan Greenspan, for long boss of the Federal Reserve. They just love Ayn Rand. Ideas like hers justify their “rational self-interest” in packaging up debts as leveraged private equity buyouts, but theirs turns out to be an “irrational self-interest”. The system was an elaborate pyramid selling scheme that some didn’t catch on to and others ignored to get the most out of it while they could—not via the phony bonds themselves, but the bonuses for selling them! We need to force more of them to give up their ill-gotten gains, then send them on a permanent enforced strike in some suitable penitentiary. Just to prove how out of touch with reality modern Republicans are, Campbell gives Rand’s book as gifts to his interns. The conservative right wing ignore history in favour of these infantile fantasies like Rand's. Penelope Newsome, writing in The Guardian, brought all this to mind. She talks about J M Keynes, 70 years ago, revealing the two great mistakes in economic policy capitalist governments make in a recession. Keynesianism was taught as received wisdom in university economics courses until about 35 years ago, when Milton Friedman's monetarism became fashionable, and set us on the road to our present state. Ayn Rand was obviously not a Keynsian.

• First Mistake—Governments should reduce interest rates and increase the money supply then businesses will borrow and invest and create a recovery in output and employment. Not so! Businesses will not borrow, even at zero interest rates, when there is no demand for their output. And why would banks lend money at zero interest rates, especially to businesses with no demand even for their existing output.
• Second Mistake—Governments should cut wages and allow costs to fall then prices will fall and demand will increase, lifting output and employment. Not so, again! Output and employment will not rise even if prices do fall, because the fall in incomes imposed first must mean that workers do not have the cash to spend, especially when they are scared of becoming unemployed.

Sound economics, for the rich as well as the poor, is to ensure everyone has an income, and therefore has money to spend. Those inclined to right wing politics prefer strong men to sound economics. The yearning for strong men, for strong leaders is immature and elitist, and elitism is at the core of fascism. Elitism is right wing, and egalitarianism is left wing—the two are not the same. As someone said online, the fetishization of Nazi chic is nearly always the mark of an infantilized society and a childish mind. Children want simple answers because they have not yet reached the level of thinking required for subtlety, but the world is not simple. It is subtle. Society does not exist just for some supposedly superior types. It exists for all its members, and unless it does, it will certainly fall apart. Then everyone suffers, until a new society is built. Fairness to all is more important in society than favoring elites, and empathy more important than disregard for others. Denmark is the least corrupt country in the world and Danes are egalitarian and happy. For them, being kind to each other is more important than being rich at someone else’s expense. Yet Rand envisions the successful society as being one entirely of chiefs with no indians. A reviewer wrote quite rightly that bad artists are rarely good guides to economics, politics, or anything else. Rand fled from communism. Plainly she hated it, and the Russian peasant, the working people. For her, they were shirkers but she seemed quite unable or unwilling to see that workers actually work, and often in hard or soul destroying jobs. But many sons of the wealthy are just idle playboys, true parasites and shirkers, or those like our modern bankers giving themselves undeserved bonuses. It usually works out well when you decide on your own remuneration! And that is just what executives of our corporations do! A capitalism with no regulation will always raise up people to take advantage of others. And they will always find some way to justify it. Obama, the leader of the Western world, worked his way up, but he is an excellent writer. Anyone tempted to read Ayn Rand should read him instead. The only country still able to buy any goods is China, and China is dealing with the recession by following Keynesian economics. The Chinese government is putting money directly into the economy—into construction and health—not into banks to stash away for executive bonus payments. It is putting it directly in the pockets of the common people who will spend it in the economy. Ordinary “moochers”, if that is what they are in the Rand world, need to be able to spend if anyone is to make money. Capitalists make money by providing goods and services for ordinary people to use. That simple fact is what so many right wing fantasists cannot comprehend.