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November 9, 2014


Before getting into who owns how much wealth in relative terms, let’s take a last look at a possible result of such corporate shenanigans as that discussed in Part II where both the boards and executives of corporations who engage in buybacks may be in breach of fiduciary duty due to their failure to do what is in the best interests of their corporations. For instance, let’s say there is an opportunity for the corporation to spend its profits not on buybacks but on a really good business deal, but that profits from making such a deal (clearly to the long term benefit of the corporation) will take time to come on line. If the board and executives of such a corporation make more money for themselves in capital gains on stock options and dividends by going the buyback route and turn down such a good deal in favor of using the money for a buyback which puts money in their own pockets when spending such profits on the good deal they turned down was the better business choice for the well-being of the corporation, is that an ethical breach of duty? Did they put their own selfish interests ahead of the best interests of the corporation? Did they live up to their responsibility as fiduciaries?

Shareholder suits are frequently necessary to ferret out the facts, and such suits are PR disasters as the subpoenaed dirty laundry of boardroom minutes come to light, minutes perhaps manufactured to cover a fiduciary breach in the event of such a suit. The managerial class knows how to cover its posterior in more ways than one within the friendly confines of the boardroom when making decisions about spending, ostensibly for the benefit of the corporation but which are in reality designed to end up in its own coffers, and the corporate shareholders/owners, potential plaintiffs, are, if ever, the last to know.

As to global wealth and how and to whom it is apportioned, the Credit Suisse GWD informs us that just 85 people own as much as half the world (!) and that just 47 individuals own more than 160 million people in this country, or 60 million households (those below the median wealth level of some $53,000). Also of note is the report’s finding that our upper middle class (defined as everyone in the top half below the richest 20%) owns only 11.9 percent of the wealth. Only Indonesia and Russia are worse off, with 10.5% and 7.5%., respectively. In all other countries, their corresponding upper middle classes own 12% to 27% of the wealth, so it is not only the poor and middle class who are denied their fair share of the wealth by the rich and corporate class. Even our upper middle class is left in the dust by the one per centers, who, as Piketty predicted, are picking up speed in wealth accumulation to swell the r side of his equation which “unless attended to” hastens the day of our economic Armageddon. Are we going to “attend to” this cancer on our economy with programs of regulation and corporate governance or are we going to join the lemmings in their run over the cliff? Piketty describes this situation as follows: “The consequences for the long-term dynamics of the wealth distribution are potentially terrifying. . .” We have good reason to be terrified, and even better reason to “attend to” what is terrifying us.

Back to international wealth distribution – the already bad gets worse. The bottom half of America is last in the entire world with just 1.3% of national wealth. Only Russia comes close to such a dismal share with 1.9%. The bottom half of all other nations owns from 2.6% to 10.2% of the wealth of their countries. I think our figure is most striking of all because it really points up in dramatic fashion how inequality here is worse than in countries which have nothing near the overall wealth we have, a scandal in its own right. Here we are the richest country in the world – and the poorest – depending upon which segment of our population we are measuring, and when one considers how this divide is increasing as new wealth is gobbled up by the one percent at an accelerated rate, it appears Piketty’s prediction of the end of capitalism (“unless attended to”) will come sooner rather than later.

We clearly need more regulation and corporate governance in our capitalist economy if it is to become fairer for all and, indeed, if it is even to survive. Contrary to hysterical cries of socialism from hired guns for the superrich, we in this other economy don’t mind that the rich are rich; we just want them to take us along for the ride. We live here, too. We man their shops and factories and offices and buy their goods and services. We provide streets and utilities, educate their children, pay taxes and provide armies to protect their property from invasion, from fire and breakdowns in public order, so why aren’t we entitled to a fair share of the wealth we helped create? Why must the superrich gobble up all the new wealth created by this economy when we are largely the ones who finance such opportunities?

For our sake and even the sake of the rich and corporate class (as it turns out), we want our fair share of the new wealth in return for the environment we have financed and work we have done which helped create such wealth rather than just helplessly watch it go down the black hole of tax evasion and buyback out of view of our economy into (perhaps) coffers of the one percent located in Luxembourg, Switzerland or other tax evasion environments covered by layers of trustees difficult to trace. This is not a call for socialism; this is a call for fair play, and I am not taken in by propaganda to the contrary designed to evade rather than confront the issue of this glaring mismatch in wealth-sharing.

As seen above, we do our share and then some; so when is corporate America going to do its share by fairly apportioning new wealth among its workers and our treasury before distributing the balance to its executives and shareholders? We protect the system in which they are greatly profiting (How many Wall Street bond traders are there serving in the Middle East?), so when can we expect fair treatment. Ever?

A few states do not have a sales tax. Most do, and some rates have ballooned to as much as 10%. Poor people are thus paying as much as 10% out of their meager resources when buying taxable goods (and in some states services as well). So while poor people may pay as much as a 10% sales tax on shoes for the kids, what do zillionaires pay as a “sales tax” on their financial purchases? Nothing! Zero! They pay only a .00002% fee (2 cents for every thousand dollars) to the SEC and nothing into our national treasury – 10% for poor people, nothing for the superrich. This can in part be corrected by implementing a so-called financial transaction tax (FTT) both to raise revenue and to prevent another financial meltdown such as the one that occurred in 2008 which brought us Bush’s Great Recession. I have favored implementation of this tax for many years. The FTT restores some equity in sales tax impact between rich and poor, is easy to administer, difficult to evade, and those subject to the tax can well afford to pay it. Clearing houses already review all trades and serve as collection agents for transaction fees. Three of the top five countries on the Heritage Foundation’s Index of Economic Freedom have adopted the FTT, Singapore, Hong Kong and Switzerland, all with booming economies. Such a tax would bring in revenue to our treasury and guard against another economic meltdown such as we suffered (and are still suffering from) resulting from under-regulation and untaxed Wall Street speculation of recent date. We have problems in our attempts to fairly solve our glaring wealth-sharing mismatch between the one per-centers and the rest of us, but (per Piketty’s r > g) little choice, so let’s get started. Today. GERALD E


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