As we discussed last week (The Disconnect and Economic Classes), the middle class is starting to disappear mean revert, while the group we described as the "ultra-wealthy" are expanding.
Here’s an excerpt from Sunday’s NYT:
"Twenty years ago, there were 14 American billionaires on the Forbes 400. Today, the list includes 374 (known) billionaires. In 1985, the combined wealth of the Forbes 400 was $238 billion, adjusted for inflation. Today, the 400 richest people in America are together worth $1.13 trillion. To put that number in perspective, $1.13 trillion is more than the gross domestic product of Canada. And it is more than the G.D.P. of Switzerland, Poland, Norway and Greece – combined.
The median household income of Americans has been stuck at around $44,000 for five years now. The poverty rate is up. Members of the Forbes 400, meanwhile, are richer than Croesus, and every hour they are getting richer."
As previously mentioned, I find the significance of this to be the waning middle class — a group that increasingly appears to be a mostly post-war phenomena.
The author of the Times piece takes a different perspective, lamenting that there is not much change amongst the top of the Ultras:
"A few days ago, I read through the newest Forbes 400 list of the richest people in America, hoping to find many names I’d never heard of. They’re not there. Through no fault of its own, the list no longer reflects a dynamic and elastic economy; instead, it reflects a growing concentration of wealth and economic power. Warren E. Buffett, Paul G. Allen, Kirk Kerkorian, John W. Kluge, Carl C. Icahn, Michael R. Bloomberg, Ronald O. Perelman, Leona Helmsley, Henry R. Kravis, the Waltons, the Pritzkers, the Newhouses, the Lauders – the same old names, one after another.
It’s hard to say when the Forbes 400 list started to stagnate, but 1999 may have been a turning point. That was the year when Bill Gates’s estimated net worth hit $100 billion. So quickly had his fortune grown that over the previous 12 months, according to Forbes’s calculations, Mr. Gates had made himself another $1 billion every eight days. Mr. Gates, who has held the No. 1 position on the list continuously since 1994, is an extreme example of accumulated and self-generating wealth, but he’s part of a trend."
What a shame that this accellerating economic shift isn’t more entertaining . . .
Source:
Don’t Blink. You’ll Miss the 258th-Richest American
NINA MUNK
NYT, September 25, 2005
http://www.nytimes.com/2005/09/25/business/yourmoney/25trail.html
Please note that the author of the NYT piece, Nina Munk (who wrote the book “Fools Rush In” about AOL/Time Warner), is a scion of a hugely wealthy Canadian mining family (Barrik Gold). To hear here talk about lack of change on the Forbes 400 is somewhat disingenuous, especially since there has been a lot of turnover in the last 20 years.
Here’s who caught it first:
http://www.janegalt.net/blog/archives/005468.html
As for a waning middle class, eh, you may be right. The world has certainly changed now that 2 billion east and south Asians are back into the workforce.
So what are we in the post-war middle class going to do? Move back onto the farms our grandparents left?
You’re not going to get invited on Kudlow’s show again with this kind of talk.
[BR — That really made me LOL! ]
I’d be curious to see the incomes of those billionaires. Income and wealth are two different things, and there are many wealthy people who have very little income. I know my parents are millionaires, but according to their tax return, they are below the poverty line. That means they are actually pulling “median household income” down, despite being well-off. Also consider, for example, that the value of your home contributes to an increase in your wealth, but does not count as income. I would guess that although median incomes may be stagnant, median wealth is probably rising.
Doug, with respect, I’d suggest you may be making assumptions. “Millionaires” is a squishy word, so let’s give your folks $3 million. $44,000 is less than 1.5% of that total. Unless your parents manage entirely tax-free or -deferred investments, I would guesstimate their incomes are above-median, not below.
“I know my parents are millionaires, but according to their tax return, they are below the poverty line. ”
Wow. I bet you’re a Republican, too. I can imagine how you & your folks justify those tax cuts. “Really, I’m poor. Really. Really!”
Below the poverty line!
Hah, that’s a good one.
I’m not sure if the writer’s comment was about entertainment. I think he suggested that if the economy was dynamic that there would be changes in the hierarchy of wealth and that the fact that it was becoming rigid indicated an ossifying economy.
This would be consistent with the observation that large parts of the middle class are being squeezed.
Paradoxically if not checked this “wealth based economy” may contain the seeds of it’s own destruction. I wonder what the response of those kids at elite universities who have always assumed success with their 5.0 gpas and the like, if opportunities tighten. Such individuals have often been the cadre of revolution which historically is fueled not by absolute need, but diminishing expectations.
The kids at the elite universities have nothing the worry about, it’s the kids at the respectable state schools who merely desire to better than their parents.
And forget about people who don’t go to university, there are fewer and fewer UAW, US Steel type jobs that allow you to physical work for money and a pension. Now, even the upscale airline pilots cannot count on their pensions and a labor job means something behind the counter.
“It’s hard to say when the Forbes 400 list started to stagnate, but 1999 may have been a turning point. ”
6 years? Have we really shrunk our attention span so much that she’s lamenting that radical change to who has money in this country hasn’t changed in SIX YEARS??
On the other hand, let’s get rid of estate taxes, so that we can permanently entrench wealth in the hands of the few and create the aristocracy the rich always wanted us to have!
Except that the estate tax is often effectively structured out of many wealthy people’s estate because they can afford expensive lawyers and acountants to set things up for them; so that its distributional affect is minimal.
Obviously the existence of the estate has not kept a few families from staying on the list in the last 80 odd years. (though it is a good revenue maker).
I was just trying to point out that income and wealth are not the same thing. That’s especially important to be aware of because statistics on income are almost always based on tax returns, which can be manipulated in many ways. So comparing how much *wealth* some people have to how much *income* other people have paints a pretty inaccurate picture.
camille, I don’t see how your response has anything to do with what I said.
More billionaires means more Democrats, no?
I made up this joke while brushing my teeth last night:
What do you call a millionaire without guilt? …
A Republican.
What do you call a billionaire without guilt? …
There’s no such thing.
That sucked, didn’t it? Man, I wish my day job was a billionaire … or, if push comes to shove, I could scrape by on a million.
The problem is not how much they have, it is how it can and is being used to influence the government. And it is not just the super-rich, it is the enormous corporations. Of the 100 largest economies in the world, 53 or 54 are corporations. In the eyes of the law, corporations are people yet they can’t be tried in criminal court. They do commit criminal acts all the time because it is more profitable to pollute water, for instance, and pay a fine than to clean up their waste. Take out the lobbyist system and regulate the corporations or the concentration of wealth will continue the wrong way. This country was made great by little people climbing their way to the top. I’m not sure that is near as possible now as before. It is the American consumer that powers our economy and it is important to maintain or improve their relative wealth.
camille roy – It is this lack of understanding that I find unbearable. If your employer owns the property their business is on they are probably “millionaires” but if their business suffers their “income” can be very low. Its not a trick or a con its not stealing from the worker its life. They put up the capital; they take the risk and they deserve to make the money if there is any. The worker has no right to the profits of the company (unless they are part owner). That attitude is what makes companies like crystler crash and burn due to employee abuse. the employees are living big but the man or woman who works the long hours and puts up the campital to start that company looses out. YOU ARE NOT A VICTIM!!!!!!