CommentsTHE ONE PERCENT - If Dustin Hoffman should ever do a remake of The Graduate, the classic 1967 film that launched his famed cinematic career, what might be the 2020s update for that film’s most iconic exchange?
A good many of us still fondly remember that poolside party scene. A 21-year-old “Benjamin” gets pulled aside for a career pep talk from an overbearing “Mr. McGuire” who says he has just one word of wisdom for Dustin Hoffman’s newly graduated young man: “Plastics!”
One real-life young man back then, James Dyson, would end up following Mr. McGuire’s advice — and go on to fashion plastic vacuum cleaners into the first global billion-dollar fortune that rests on polymers.
But no Mr. McGuire here in the 2020s would ever be pitching boring old plastics as a sure-fire path to grand fortune. What red-hot field of business endeavor would a modern-day McGuire be hawking? A new report from Bain & Company, a global consultancy with offices in 65 cities worldwide, has a suggestion: wealth management.
And why do analysts at Bain see wealth management — the business of helping people of means grow their assets — as such a promising career path? A simple financial fact: A colossal chunk of the world’s wealth now sits in the pockets of affluents who have no clue what to do with all their good fortune. The “investable assets” of these wealthy worldwide, Bain is predicting, figure to double by 2030.
“The rich are getting richer, that’s for sure,” as Bain partner Markus Habbel, one of the authors of the financial firm’s new report, told the Financial Timesearlier this week.
“If you have a wealth management capability,” agrees Goldman Sachs chief operating officer John Waldron, “you have a much more valuable business.”
The new Bain study doesn’t dive deep into any detail about our continuing maldistribution of global income and wealth. But other analysts most definitely havebeen subjecting that maldistribution to some increasingly sophisticated analysis. Over the past quarter-century, these researchers — many inspired by the work of the French economist Thomas Piketty — have been developing new statistical approaches to determining just who has what and how much of it.
Researchers like Emmanuel Saez and Gabriel Zucman, both at the University of California-Berkeley, have taken us well beyond the tax return data that’s traditionally driven our core inequality stats. In their just-published latest work, Saez and Zucman have joined with their UC colleague Thomas Blanchet to tackle the challenge of calculating inequality in what they call “real time.”
U.S. government stats, the three authors point out, “do not make it possible to know who benefits from economic growth in a timely manner.” Indeed, until recent years, most numbers on income and wealth distribution came from snapshots taken well before the data went public. The most recent distributional stats currently available from the Federal Reserve’s exhaustive triennial Survey of Consumer Finances, for instance, cover 2019.
In that same year, Federal Reserve analysts did inaugurate a brand-new data series with a much briefer lag time. These new distributional snapshots have been appearing quarterly ever since, and the latest, released last month, covers this year’s first three months. In 2022’s quarter one, the Fed’s “Distributional Financial Accounts” show, America’s top 1 percent held 31.8 percent of the nation’s wealth. The nation’s bottom half held 2.8 percent.
The University of California’s inequality stats team has now trimmed the data lag time even further, to help us “track the distributional impacts of government policies” on a month-to-month basis and provide critically important information to have in the middle of an economic crisis.
The Berkeley team notes that none of the timely government economic stats we’ve had up to now — on total national personal income, unemployment, and more — have come “disaggregated by income level.” Without that disaggregation, we can’t know what social groups are benefiting from current government policies and what groups aren’t. And if we don’t have that information, then government programs successfully helping people who really need help can fall politically by the wayside.
The Berkeley analysts illustrate that dynamic by applying their new “real-time inequality” statistical methodology to our Covid pandemic years. At the end of 2021, their approach shows, America’s working-class households found themselves with 20 percent more disposable income than before the pandemic, thanks to the federal government’s expanded child tax credit and expanded earned income tax credit for adults with children.
But disposable income for the nation’s working families promptly then fell in early 2022 after Congress let those aid programs expire. By June 2022, the Berkeley economists sum up, the wealth share of America’s top 0.1 percent had returned “to its pre-Covid level.”
So what do we do with all the new distributional data we now have available? Do we gaze at the new numbers and marvel at how incredibly rich our rich continue to be? Or do we battle to create a much more equal society where helping the wealthy manage their money no longer rates as our nation’s hottest career option?
A host of long-time egalitarian activists are choosing the latter. They’ve just come together to establish an Excessive Wealth Disorder Institute, and this new Institute, as its first order of business, is now teaming up with social justice advocacy groups and coalitions in a “Tax the Ultra-Rich Now” campaign to “TURN” America around.
TURN campaign activists will be initially “collaborating with grassroots organizations across five key states – Georgia, North Carolina, Nevada, Pennsylvania, and Wisconsin – with a focus on organizations centered in communities of color.”
Other campaigns will no doubt follow, on a wide variety of fronts. Those campaigns will have no shortage of tax-the-rich proposals to draw from. Among the latest, from Bob Lord and Dylan Dusseault of Patriotic Millionaires, a callfor the passage of an “Oppose Limitless Inequality Growth and Restore Civil Harmony Act.” This “OLIGARCH” legislation would key new taxes on the wealth of America’s super rich to the nation’s median — most typical — household wealth.
Under the OLIGARCH Act, households holding between 1,000 and 10,000 times America’s median household wealth would pay an annual 2 percent tax on their fortunes. Those rates would escalate on households sitting on even greater stores of wealth. In the top tax bracket, for households worth over one million times our most typical household wealth, the annual tax would run at 8 percent.
Back in 1980, Lord and Dusseault note, fewer than 0.005 percent of America’s adults held over 1,000 times the nation’s median household wealth. By 2020, the ranks of that wealth cohort had quintupled. In 1983, not a single American held a fortune that equaled 100,000 times the nation’s median household wealth. In 2021, slightly over 50 Americans exceeded that threshold, and two Americans actually held over a million times the wealth of America’s most typical households.
That can all change. We all can change it.
(Sam Pizzigati writes on inequality for the Institute for Policy Studies. His latest book: The Case for a Maximum Wage (Polity). Among his other books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970 (Seven Stories Press). )
