Ready to get in the mood for next week’s Democratic Party national convention? Just click your way online to the draft 2008 Democratic Party platform. You’ll find, stuck inside, some stirring passages that make an eloquent case for change. But you won’t find, unfortunately, a single explicit line about what most needs changing in the United States today: our nation’s alarmingly top-heavy distribution of income and wealth.

What difference does this top-heavy distribution make? We explore, in this week's Too Much, the consequences of concentrated wealth on General Motors, the company that once stood tall as Corporate America's signature enterprise.

One quick publishing note: We'll be taking a summer break next week. We'll be back Labor Day with the inside scoop on a powerful new report on how average Americans are subsidizing, with their hard-earned tax dollars, the paychecks of America's most excessively paid corporate execs.

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Know anyone who wakes up every day at five, works without a break until late afternoon, then gets back to work and sticks at it until bedtime — only to have that bedtime interrupted at least a couple times a night? You probably do. Single moms with young children, after all, have been living schedules just this hectic for years. Adam Levinson has a hectic schedule, too. The difference between single moms and Adam Levinson? About $300 million. That’s the bonus Levinson, a 38-year-old Wall Street speculative trader, collected from his employer, the Fortress Investment Group, this past April, the Wall Street Journal revealed last week. The Manhattan-based Levinson runs a hedge fund for Fortress. That fund is currently losing money, but Fortress, a public traded company, apparently feared that Levinson, without a sweet incentive to stay, would jump ship to a privately held hedge fund. How's Levinson defending his lush new reward? He’s emphasizing how long and hard he works. He gave the Journal an hour-by-hour rundown of his busy schedule, starting with his 5:10 a.m. wake-up for 20 minutes of yoga . . .

Investigative reporting took an interesting twist last week in the UK. Reporters from the Sun, a London daily, staked out Harrods, the high-end shopping emporium, and counted the number of chauffeur-driven luxury cars either idling or driving around the block while their passengers shopped inside. The stakeout, in just one day, caught over 50 tycoons who “ignored global warming to ensure their gas-guzzlers were waiting by the exit.” The worst case? One $300,000 Bentley “spent four hours ticking over” as the car’s two passengers shopped inside. The Bentley, the Sun noted, emits four times the pollution of standard compact car . . .

The United States is now handing private contractors upwards of $20 billion a year to service the war in Iraq, the Congressional Budget Office reported last week. How many of these dollars are ending up in the pockets of contractor top executives? We’ll soon know, thanks to a little-noticed legislative victory in Congress earlier this summer that requires all major contractors to reveal, for the first time, how much their top execs are making. Until now, only companies with shares publicly traded on Wall Street have had to disclose executive pay figures. The Government Contractor Accountability Act, an add-on to the latest war supplemental spending bill, mandates that same disclosure for privately held contractors like security giant Blackwater. At a hearing last fall, lawmakers asked Erik Prince, Blackwater’s CEO, how much he was personally pocketing from taxpayer dollars. Prince refused to answer, acknowledging only that he had made “more than a million.”

The stock market’s down. Collateralized debt obligations are tanking. Real estate is wobbling. What’s a wealthy investor to do? Buy some fine wine, the global economy’s hottest new “asset class.” The Liv-ex 100 Fine Wine Index soared 42 percent last year, over 10 times the return from stocks in the S&P 500, and traders are talking up the virtues of not just drinking fine wine, but investing in it. The international market for wines that routinely run several hundred dollars a bottle has already hit $3.5 billion a year. Fine wines, New York wine dealer David Sokolin assured the Investment News recently, “could never be like a bubble” because consumers keep drinking up their investment. Adds Sokolin: “Just imagine what a share of Google would be worth if every night there was less of it.”

Frank Sinatra and Ronald Reagan once partied there. A staff of 50 gardeners now keep it spiffy. And a Russian billionaire will soon call it home — or, more likely, one of his homes. We’re talking, of course, about the Villa Léopolda, the French Riviera estate that has just become the “world’s most expensive house.” An anonymous Russian corporate oligarch has purchased the property — for a record $750 million — from the widow of a murdered Swiss private banker. Built a century ago by King Leopold II of Belgium, the butcher of the Congo, the 20-acre spread has also belonged to Italy’s Agnelli family, the founders of Fiat. Microsoft’s Bill Gates reportedly offered about $112 million for the property three years ago.

Quote of the Week

“There can be no long-term peace or social stability in a country if the gap between rich and poor is too wide. The same is true for the world: If the gap between rich and poor nations remain wide or is even increasing, lasting stability will not be attained.”
Piet Naudé, professor of ethics, Nelson Mandela Metropolitan University, The Herald (Port Elizabeth, South Africa), August 12, 2008

New Wisdom
on Wealth

American News Project, Super-Rich Tax Cheats. This new online video covers the revelations from last month's Senate hearing on the estimated $100 billion a year hidden from the IRS in offshore tax havens.

Thomas Elias, Foreclosures: It's about the income gap, Appeal-Democrat (Marysville, Calif.), August 12, 2008. Discusses how the wealth of middle class consumers has been shifting to corporations.

Eric Alterman, Think Again: Money for Nothing, Center for American Progress, August 13, 2008. A stirring defense of Barbara Ehrenreich's new book on the price we pay for tolerating extreme inequality.

A Sadly Missing Party Platform Plank

Over the past quarter-century, America’s richest 0.1 percent have tripled — and the richest 0.01 percent have quadrupled — their share of the nation’s income. Over this remarkable span of time, not one Democratic Party platform has suggested that American politics ought to concentrate on undoing this concentration.

Unchallenged, this concentration just continues merrily along. America’s most affluent 400 took home an average $214 million in 2005, the most recent year with figures available. A half-century ago, in 1955, the top 400 averaged, after adjusting for inflation, a mere $12 million.

What have the rich been doing to advance so handsomely?

“The standard explanation,” UCLA economist Sanford Jacoby noted this past spring in an insightful analysis of the dynamics that have left the United States so dangerously unequal, “has to do with market forces.”

The market is rewarding America’s corporate and financial elites, the story goes, for the economic value their smarts and skills create.

But these corporate and financial elites, Jacoby's analysis shows, haven’t really been creating value. They’ve been extracting it.

“Executives and shareholders,” he notes, “take resources that otherwise would have been reinvested or returned to other factors of production” — research and development, for instance — and, in the process, leave companies less competitive in global markets.

This extraction of value enriches executives and America’s already wealthy — who own the overwhelming bulk of corporate stock — and, at the same exact time, enhances “income stagnation for the working poor and middle class.”

Last week, in the Chicago Tribune, Jacoby explored a concrete example of this extraction process — at General Motors, once the single most important corporation in the United States, the mighty engine of post-World War II American prosperity.

“As GM goes,” the old saw went, “so goes the nation.”

GM these days, daily headlines remind us, is not going particularly well. The company’s low-mileage Yukon and Suburban SUVs are piling up unsold on lots across the United States. GM workers are losing jobs and benefits. Rumors about a GM bankruptcy have even started circulating.

The conventional wisdom from conservative circles blames GM’s current woes on high wages and pensions for workers. More perceptive critics, Jacoby notes, blame GM’s “overreliance on gas-guzzlers, mediocre product quality, and unimpressive design.”

But that overreliance didn’t have to be. In the 1990s, GM was swimming in cash, more than enough to match Toyota, or any other competitor, in innovative breakthroughs.

“So what in the world,” asks Jacoby, “did the company do with all its money?”

That money, simply put, went to making the rich richer, through maneuvers designed to reward both shareholders and company executives flush with stock options.

From 1996 to 2000, GM spent $13 billion buying back its shares of stock on the open market, a move that increases “demand” for a company’s shares and jacks up the share price. GM spent $7 billion more on dividends to shareholders.

On the other side, Jacoby points out, Toyota “successfully resisted demands — chiefly from American investors — to raise its payout ratio” to shareholders. Toyota’s top executive in the late 1990s, the UCLA economist adds, believed that shareholder interests “would best be served if Toyota plowed its cash into research and development for hybrids and other long-term improvements.”

Toyota made investments in the future. GM put smiles on rich people’s faces.

The next occupant of the White House, to have any hope of restoring American prosperity, is going to have to stop the grinning.

The Undeserving Rich

Polly Toynbee and David Walker, Unjust Rewards. Granta Books, 2008.

The Guardian, a leading British daily, has been serializing this new book from journalists Polly Toynbee and David Walker. Take a look. In Unjust Rewards, Toynbee and Walker have been able to pull off something unusual. They’ve gone up close and personal with the super-rich.

These close encounters — in focus groups conducted by a top-tier UK survey research group — brought together bankers and law firm partners making from $300,000 to $20 million a year. Amid all this privilege, Toynbee and Walker went looking for empathy.

“We hoped to gain an insight into their notions of fairness,” the two authors note, “what might persuade them to share more of their wealth with others.”

Toynbee and Walker didn't find much empathy. But they found plenty of contempt.

Contempt for the poor, the “quite a lot of people,” as one banker put it, who “haven't done well because they don't want to achieve.”

Contempt as well for those — like nurses and teachers — who have achieved, but in vocations that don’t offer much in the way of rewards.

“You won't find a teacher,” one of the rich boasted, “that works as hard as we do.”

Contempt, most of all, for efforts to redistribute wealth — down — in any way, shape, or form. One banker even blasted the British government program that endeavors to give expectant mothers nutritional support.

“This thing of giving pregnant women £200 for dietary supplements,” sputtered a banker. “Like, as if they'll really spend it on fruit.”

The venom in comments like these caught Toynbee and Walker by surprise.

“None of us like to feel guilty about our comfortable lives, and it would have been absurd to expect mea culpas from these people just because they earned so much,” the authors observe. “What we had hoped for was more awareness, some recognition that their position needed explaining and even justification.”

That recognition the two journalists just didn’t see. The rich bankers and lawyers they brought together were too busy fuming at “wasteful” government — and blasting estate taxes — to stop for any introspection.

“Andrew Carnegie said that a man who dies rich dies shamed,” Toynbee and Walker ultimately conclude, “but it seems embarrassment is easily weathered.”

Stat of the Week

The United States, the Economic Policy Institute reported last week, deserves a global gold medal — in wealth. But America’s lopsided distribution of that wealth makes the nation a loser in almost every other basic economic category that determines how well people live. Of the world’s top 19 industrialized nations, the United States ranks worst in the hours average workers have to labor and worst in overall poverty.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.