Cause and Strategy for Class Warfare; (with exerpts from Rothkopf's book Superclass)

(Crossposted at Daily Kos)

Often after Democrats propose a tax hike on the super-rich, or campaign finance and lobbying reform, pundits cry out "Hey, that's class warfare!"  Well, yes it is, but we didn't start this war.

The super-rich in America hold grossly disproportionate political power and wealth.  They use their wealth to buy political power, and then use that political power to acquire more wealth.  They use that newly acquired wealth to buy more political power which brings them more wealth and greater power in an upward spiral that serves them at the expense of everyone else.

When we consider climate change alone, through this strategy the super-rich are literally destroying our planet.  It’s time to fight back.

The bulk of this diary contains page-indicated excerpts from David Rothkopf’s 2008 book Superclass, an exhaustively documented indictment of the super-rich.  But before we get to those reasons for the poor, middle class and rich to join forces and wage full-scale political and economic war on the super-rich, let’s consider the nature of problem in more detail, and a proposed strategy for fighting this war. 

The Problem – Campaign Finance and Lobbying Regulations that Favor the Super-rich

Most Progressive legislation with broad public support aimed at addressing America’s problems is defeated by:

  1.  Opponents who make large contributions to our elected officials.
  1.  Opponents who intimidate elected officials supporting that legislation by threatening to make large contributions to their opponents in perennially upcoming elections.
  1.  Corporate opponents who establish 501c3 not-for-profit corporations as front-groups that finance media campaigns to turn public opinion against the legislation.

Main Obstacle to Campaign Finance and Lobbying Reform

Republicans are the army of the super-rich, and no effective campaign finance and lobbying reform will arise from them.  Democratic candidates and elected officials offer the only avenue to the needed reforms.  However, large financial contributions from the super-rich to incumbent Democrats provide them a huge financial advantage over their Republican challengers in elections.  These Democrats are reluctant to enact limits on political contributions that would deny the super-rich their means of buying political power because they fear that without large contributions they would lose re-election.

The U.S. Supreme Court has provided the super-rich some campaign finance and lobbying protections through their rulings that "corporations are persons" and that "money is speech," however these protections are by no means absolute or unassailable.  For example, corporations obviously cannot vote, and there are limits at the state and federal level to how much an individual can contribute to political campaigns during each election cycle.  

Proposed Remedy to the Main Obstacle

Legislation that substantially lowers the limit on individual political contributions per-cycle will effectively deny super-rich individuals their disproportionate power to influence elections.  Once that is achieved, the remaining task is to limit corporate contributions.  One way to do that is to pass legislation stipulating that while corporations are persons, they are only one person.  So, a corporation would be able to contribute to political campaigns, but would be subject to the same limit as individuals.  Employees of these corporations would naturally maintain their right to make individual contributions.

Main Challenge to Enacting the above Proposed Remedy

Democrats holding office at the state and federal level will only institute the above-described reforms if they can be assured of maintaining a substantial financial advantage over their Republican challengers during each election.  Unfortunately, the party out of power usually does better than the party in power at raising funds from small contributions.  So, the way to convince these Democratic officials that they can enact the proposed reforms while maintaining their fundraising advantage over challengers is to reverse the current dynamic by developing and implementing a strategy that would ensure that small contributions to Democratic candidates far outpace small contributions to their Republican challengers.

Proposed Campaign to Address this Main Challenge to Major Campaign Finance and Lobbying Reform – The Ten Percent Solution.

At present, the many Democratic groups working to safeguard our environment, create more equitable economic conditions, protect the rights of minorities, etc, single-mindedly work on their individual initiatives and agenda, virtually ignoring the fact that the main reason their agenda is blocked by legislators is the unfair nature of campaign finance and lobbying regulations.

These Democratic interest groups need to come together for this common fight to reform campaign finance and lobbying regulations.  One way they can do that is for each group to commit ten percent of their resources to this fight.  There are various ways those resources could be used, but the most effective would be to help create and implement the strategy that results in Democratic incumbents receiving substantially more campaign funding than their Republican challengers from small contributions.

Outcome

Democratic interest groups will ultimately recognize that their greatest enemy is the unfair campaign finance and lobbying regulations that empower the super-rich to subvert government to serve them rather than to serve society, and band together in devoting at least ten percent of their resources to fighting this battle.   When they do, they will ultimately succeed in persuading Democratic elected officials to enact the strong campaign finance and lobbying reforms that will free those Democrats from protecting the super-rich, and those Democrats will finally be in a position to safely pass the society-benefiting legislation these Democratic interest groups advance.  

That is the plan.  Now following are excerpts from David Rothkopf’s 2008 Superclass, which provides all the reasons the poor, middle and rich classes need to wage this class warfare against the super-rich.

Superclass: The Global Power Elite and the World they are Making by David Rothkopf, 2008  

(text follows each page number)

XIV  By posing the idea of the existence of a superclass, some key questions emerge. The most obvious is: how big is it? Using the above parameters and combing systematically through publicly available resources, my researchers and I identified just over 6,000 people who qualify. As will become clear, it is a choice based on natural cutoff points, providing us with a group that is both small enough to analyze in some rational way and large enough to encompass all the core international communities from politics, business, the military, and the world of ideas needed for it to be representative of the most important sources of power worldwide.

XV  This book is, by its nature, very much about the gross inequality in the distribution of power and wealth in the world. My position is that these are issues we ignore at our peril-in practical terms, in political terms, and perhaps most of all, in moral terms.

The reality is that the combined net worth of the world's richest thousand or so people-the planet's billionaires-is almost twice that of the poorest 2.5 billion.

In the course of writing this book, I have looked pretty long and hard at a number of theories regarding who runs the world and at the rumors that swirl around high-level conclaves of the superclass such as Davos and Bilderberg, the Trilateral Commission and the Bohemian Grove. I'll admit, I certainly would not want to miss out on such global

9  Today, while the defense budget exceeds $425 billion, the earnings of only the fifty most profitable U.S. companies top that number and, indeed, the combined revenues of just the top two, ExxonMobil and Wal-Mart, dwarf it, beating it by more than 50 percent. Without a doubt, corporate economic clout has grown dramatically.

33  In 2007, for example, global GDP was estimated to be $47 trillion. That same year, the top 250 companies in the world had combined sales in excess of $14.87 trillion, equivalent to nearly a third of global GDP and-an amount exceeding the GDP of the United States or the European Union ($13.20 trillion and $13.74 trillion, respectively). Just the top one hundred companies had sales worth over $9.72 trillion, and the comb1ned sales of the top five (Wal-Mart, ExxonMobil, Royal Dutch Shell, BP, and General Motors) was nearly $1.5 trillion-larger than the GDP of all but seven countries.

35  Although no measure perfectly conveys the scope of the influence of the world'; largest corporations, viewed from any perspective it is considerable. The world's two thousand largest corporations at the time of this writing collectively account for $27 trillion in annual sales and 5103 trillion in assets. (For a comparison, the total market value of the assets traded in global capital markets is estimated by McKinsey at $140 trillion.)

In 1983, the top five hundred companies have revenues equal to 15 percent of global GDP; today that has 'more than doubled to over 40 percent.

36   The top fifty financial institutions combined account for $48.5 trillion in assets-more than a third of the global total. The top one hundred account for more than two-fifths: $60.4 trillion.

To give you a further sense of how similar concentrations of control carry over into the realm of individual investors, the richest 10 percent of Americans owned nearly 85 percent of all stock in 2001, with the richest 1 percent of Americans controlling one-third of America's total wealth.

Nowhere is the concentration of wealth more astounding than in the case of hedge funds. In just a few years, hedge funds have grown almost exponentially in economic significance, from controlling $221 billion in 1999 to more than $2 trillion by mid-2007.

37  Though within that top 10 percent, a group that requires $61,000 in assets to qualify for entry, a similarly stark stratification occurs. While this particular "elite" controls 85 percent of global wealth, the top 2 percent in this group owns half the planet's wealth, and the top 1 percent possesses around 40 percent. (Each of those in the top 1 percent owns a minimum of $500,000 in assets.)

38   This top 1 percent of global adults, this group of quasi-millionaires, represents about 40 million people. Within this group, however, according to a 2007 report by Merrill Lynch and Capgemini, there are 9.5 million individuals whose financial assets exceed $1 million. And that group, which a Merrill Lynch study has termed High-Net-Worth Individuals (HNWIs), controls over $37 trillion in global assets-double what it controlled just ten, years earlier.

However, within this group of exceptionally fortunate individuals is another group cited earlier-the 1 percent of them, or roughly 95,000, who each own financial assets in excess of $30 million (these are the UHNWIs, or Ultra-High-Net-Worth Individuals), for a total of $13 trillion. And we know that within this group there is another approximately 1 percent elite, the world's thousand or so billionaires.

40  Carlos Slim Helli, one of the richest men in the world with over $67 billion, controls 94 percent of Mexico's telephone landlines and 70 percent of the country's broadband Internet market through the companies he owns. Between 2006 and 2007, his fortune grew by $19 billion, or about $2.2 million an hour, and in 2007 was equivalent to nearly 8 percent of Mexico's GDP. Through his companies, he has used effective monopoly power and huge political influence to push prices up, such that the average monthly phone bill for a small business in Mexico is 120 percent higher than that of a similar business in the United States.

41  The United States spent more than $630 billion on defense in 2007, more than the rest of the world's defense budgets combined.

54  Today Chile's poorest are farther away in economic terms from Chile's richest than at any time in its modern history. The top 20 percent of Chileans earn almost 67 percent of the country's income while the bottom 20 percent earn just over 3 percent. Indeed, not only is the gap between rich and poor in Chile worse than it was during the decidedly unsentimental Pinochet years, it is among the worst in the world on a continent sadly marked by the distinction of producing the worst inequality indicators on the planet.

66  For example, the richest countries in the world, such as the United States, the EU, and Japan, are now on average more than one hundred times richer than the poorest, such as Ethiopia, Haiti, and Nepal. A hundred years ago, the ratio was closer to 9 to 1. In fact, the ratio between the GDP of today's richest country in per capita GDP terms, Luxembourg, and today's poorest, Guinea-Bissau, is 267 to 1, when thirty years ago the same ratio between the richest, the United States, and the poorest, Bangladesh, was 88 to 1. The world's billionaires, those roughly one thousand individuals, have combined wealth greater than that of the poorest 2.5 billion.

In sub-Saharan Africa, almost half of the population lives on less than a dollar a day, while only 3.5 percent of Europeans live with such agonizing, life-crushing deprivation. Even in China, which has shown such remarkable growth over the past two decades, inequality is increasing; in the period between 1984 and 2004, China's Gini coefficient almost doubled, from 29 to 47.

69  These stories tug at our heartstrings with the plight of the top 1 percent of American earners, who make over $350,000 a year and who watch in despair as most of the spoils go to the top one-tenth of 1 percent (who average $2.3 million) and the top hundredth of 1 percent  (who average $14 million). As The New York Times explains in its series "'Class War," "While the percentage change in average real household income between 1990 and 2004 was an increase of 2 percent for the bottom 90 percent of American households, it increased 57 percent for the top 1 percent and shot up to 85 percent for the top .1 percent and 112 percent for the top .01 percent. That is, the richest are getting richer almost twice as fast as the rich."

The trend extends beyond American borders. Similar phenomena can be found in Britain, where the superrich have seen their wealth rise by between 500 and 600 percent while average retail prices increased only 60 percent over the same seventeen-year period. Today the top one-tenth of 1 percent in Britain are taking a bigger slice of the pie than _ any time in modem history.

71  But Tom Hertz of American University has revealed that in the United States there is "less than a 2 percent chance that an American born to parents whose income is in the. Bottom 60 percent of all incomes will end up in the top 5 percent. Americans born to parents in the bottom 20 percent, meanwhile, have a 40 percent chance of staying at the bottom."

72  CEO compensation in the United States has skyrocketed in recent years. Executive pay has more than quadrupled since 1993, and today the average CEO of a large company takes home 364 times the income of his or her average employee (a ratio that is ten times higher than when I started in the working world, in the late 1970s). The numbers are astounding. In 2006, the average take-home for the chief of a Forbes 500 company was $15.2 million, but a number of individuals 'made vastly more than that. Accounting for exercised stock options, Terry Semel, then chief of Yahoo!, netted $174 million in 2006. That same year, Barry Diller of lAC/InterActive took in $295 million, and Ray Irani of Occidental Petroleum made more than $321 million. The compensation king, Apple's Steve Jobs, took home an astronomical $646 million.

73  Home Depot's Robert Nardelli, for instance, reportedly received a $210 million severance package for his six years as CEO (during which the company's value dropped 7.9 percent). Outgoing pfizer CEO Hank McKinnell left with more than $200 million as well. 1he board of Exxon (and its shareholders) gave CEO Lee Raymond a going-away gift of $357 million. AT&T bid farewell to CEO Ed Whitacre to the tune of $158 million-in addition to a $l-million-a-year consulting contract, $24,000 annual "automobile benefits," more than $6,000 a year for private home security, $25,000 for country club fees, and free use of AT&T corporate jets.

The median pay for CEOs of Britain's top one hundred companies in the FTSE (Financial Times Stock Exchange) index was $4.3 million in 2005, almost four times the level of a decade earlier. (The average for CEOs of the top 350 American companies was $6.8 million.) That same year, the head of Dutch baby-food producer Royal Numico took home more than $13 million, then chairman of BP John Browne made $18.5 million, and a French construction company boss, Antoine Zacharias, won a golden parachute worth $22 million when he left the company.

75  One striking example of overpayment is the former CEO and chairman of packaged foods giant ConAgra, Bruce Rohde, who earned more than $45 million in his eight years at the company and who took home $20 million when he retired in 2005. Under his leadership, ConAgra's share price fell 28 percent, nine thousand workers were laid off, and the company closed thirty-one plants. The company also regularly missed earnings targets and underperformed its competitors.

Even J. P. Morgan thought bosses should only get 20 times more than their workers, at most.

81  According to Institutional Investor's Alpha magazine list, three hedge fund managers made more than $1 billion in 2006: former math professor James Simmons, known for his $6 billion Medallion fund; Kenneth C. Griffin of Chicago's Citadel Investment Group; and Eddie Lampert, discussed earlier, whose largest investment is an $11 billion stake in Sears. That means these three guys-whose companies did not produce anything as tangible as a single paper clip-each raked in annual income that _'31fed the GDP of more than thirty different countries.

In fact, 4O out of 100 members of the Senate and 123 out of the 435 members of the House of Representatives are millionaires, which raises all sorts of questions about terms like "representative democracy."

According to the Center for Public Integrity, the top twenty pharmaceutical companies alone spent over $600 million on lobbying between January 2005 and June 2006. According to the Center for Responsive Politics, the top five oil companies alone spent almost $200 million lobbying between 1998 and 2005. Businesses and individuals alike can direct money under the table to political decision makers themselves, or use it toward media coverage to influence public opinion on key issues. Through such an approach, individual companies and industry groups undertake global campaigns to advance special interests, such as pharmaceutical companies' desire to promote creation and enforcement of intellectual property laws protecting patents.

85  For example, when I was in the Department of Commerce, we began efforts to identify corruption by major' international corporations where payoffs were made to influence the Outcome of deals. Even with very limited resources, we were able to identify instances of corruption affecting nearly three hundred commercial contracts worth more than $140 billion over five years.

98   As Adams observed, the Civil War had transformed America. The economy burgeoned, growing from a real GDP of $72 billion in 1860 to almost $170 billion twenty years later.

120  In fact, for the S&P 500, the biggest publicly listed companies on US. stock exchanges, 2007 was a watershed year: For the first time, the five hundred companies earned more than half of their revenues internationally rather than from their "home" market. That's up from 35 percent overseas revenues just five years earlier, in 2002. The trend has become so pronounced that investment banks are offering U.S. investors seeking a "safe" way to invest internationally baskets of U.S. companies that earn most of their revenues abroad. Goldman Sachs introduced one in 2007 that includes thirty-four major U.S. companies that derive almost two-thirds of their sales internationally.

In 2007 the smallest company on the Fortune Global 500, a Canadian aerospace firm called Bombardier, had revenues of $14.9 billion and assets of over $18 billion. The Forbes Global 2,000 companies hail from fifty-seven countries and the smallest has revenues of $40 million. (The total assets of these companies are estimated to exceed $100 trillion.)

121  There is a group of a few thousand people among the corporate elite who effectively control perhaps $100 trillion, two-thirds of the world's total assets.

142  ExxonMobil spent more than $7.5 million on lobbying in 2004, and nearly the same amount in 2005. (In comparison, its big oil cousins BP and Shell spent just $2.8 and $1.4 million, respectively.)

152   Phillips describes how the rich have shaped policy throughout U.S. history, from the great profits enjoyed by American corporations as a result of wars they supported (share prices increased ten or even twenty times for some war suppliers during World War I) to the wealth held by top officials, like the ten members of Warren Harding's cabinet who were collectively worth more than $600 million. He cites Franklin Roosevelt's observations in a letter to one of Woodrow Wilson's top advisers: "The real truth is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson-and I 'am not wholly excepting the Administration of W.W."

214  On the basis of dollars invested alone, more than fifty years of "permanent war" have confirmed America's status as the world's one true military superpower. According to the highly respected Stockholm International Peace Research Institute (SIPRI), of the roughly $1.2 trillion in global defense spending by governments in 2006, $529 billion, approximately half, was spent by the United States. Approximately 80 percent of the total was spent by America and its NATO allies.   After the United States, according to SIPRI data, the top four spenders are Britain at $59 billion, France at $53 billion, China at $50 billion (note the discrepancy with the "official" figure cited on page 213), and Japan at $44 billion. Only the top thirteen spend over $10 billion a year each.

 

Tags: super-rich, campaign finance reform, lobbying reform, Democratic Groups (all tags)

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