Two magazine covers stood out in poignant contrast on newsstands last week. Forbes
magazine released its 29th annual listing of the world’s billionaires. Time
Magazine’s cover story wondered “How to End Poverty.”
It was a good year for the global billionaires’ club. Their ranks grew
to 691, up 17 percent from the previous year. Collectively, the wealth of the
world’s billionaires reached $2.2 trillion, up more than 57 percent over
the last two years.
Poverty is growing as well. Time reports that nearly half of the world’s
6 billion residents are poor. Over one billion of them subsist on less than
$1 a day. In the United States, according to the U.S. Census Bureau, the number
of impoverished Americans rose 3.7 percent in 2003. The number of children living
in poverty rose 6.6 percent.
Forbes seeks to explain the billionaires’ success by noting that a majority
of those on the list are “self-made.” Forbes’ website features
an interactive quiz that asks, “Do you have what it takes to become a
billionaire?” and proceeds to explore things like marital status and hobbies.
The idea is that many billionaires made it on their own.
But to suggest that membership in the growing billionaires’ club requires
only a combination of hard work and character traits ignores some dramatic shifts
in global economic rules that explain the cavernous divide that has developed
between the very rich and the very poor.
Tax rates have fallen on upper income citizens and corporations worldwide.
Fifty years ago in the United States, the highest marginal income tax rate was
91 percent; today it is 34 percent. As recently as 1979, taxes on capital gains
from the sale of stock, real estate and businesses were 35 percent; today they
are 15 percent. Corporate taxes as a percentage of the U.S. economy have shrunk
from 4.1 percent of Gross Domestic Product in 1965 to just 1.5 percent in 2002.
While corporate taxes have declined throughout the world, they have plummeted
in the United States, leaving only Iceland among industrialized countries with
a lower corporate tax burden.
Several of the wealthiest billionaires capitalized on public assets and made
their fortunes by buying them. This was the case with Mexican Carlos Slim Helu,
the world’s fourth richest man, who used inherited wealth to buy a substantial
share of Mexico’s privatized national telephone company. U.S. billionaires
Bill Gates, Paul Allen and Steve Ballmer of Microsoft, and Larry Ellison of
Oracle would not be in Forbes’ top 20 billionaires had the U.S. government
not invested tens of billions of public dollars developing computers and the
Some billionaires’ fortunes rest upon paying their employees poverty-level
wages. Such is the case for the Walton family (numbers 10 through 14 on the
Forbes list.) Wal-Mart is the largest private employer in the world. Many of
its U.S. workers are so poorly paid that they must rely on food stamps and other
forms of public assistance to get by. Such forms of government aid represent
an indirect government subsidy to corporations whose business model does not
include paying employees enough to live on. Worldwide, billions are gained by
outsourcing service, production and manufacturing functions to workers who labor
in sweatshop conditions in countries like China.
The role of government policy in determining who has wealth and who does not
continues to expand. During the recent debate on the bankruptcy bill, federal
lawmakers refused to close the “asset protection trust” loophole
increasingly used by millionaires and billionaires to shelter mansions and other
assets from creditors in bankruptcy. Those same lawmakers weakened protections
that protect the family homes of ordinary people from creditors during bankruptcy.
Forbes is wrong; none of the billionaires did it alone. The chasm between rich
and poor is not a divide between who has intelligence and drive and who does
not. Rather it results from a society whose rules allow some to amass wealth
greater than could be enjoyed in a thousand lifetimes, while they deny others
enough money to scrape through just one lifetime.
Scott Klinger is the co-director of the Responsible Wealth project at United
for a Fair Economy www.faireconomy.org and co-author of “Executive Excess
2004: Campaign Contributions, Outsourcing, Unexpensed Stock Options and Rising
© 2005 Minuteman Media