In his "Gospel of Wealth," Andrew Carnegie argued that average
Americans should welcome the concentration of wealth in the hands of a
few, because the "superior wisdom, experience, and ability" of the rich
would ensure benefits for all of us. More recently, Edward Conard
the author of "Unintended Consequences: Why Everything You've Been Told
About the Economy Is Wrong, said: "As a society, we're not offering our
talented few large enough rewards.
We're underpaying our 'risk
Does wealthy America have a point, that giving them all the money will
ensure it's disbursed properly, and that it will create jobs and
stimulate small business investment while ultimately benefiting society?
Big business CEOs certainly think so, claiming in a letter to Treasury
Secretary Timothy Geithner that an increase in the capital gains tax
would reduce investment
"when we need capital formation here in America to create jobs and expand our economy."
They don't cite evidence for their claims, because the evidence proves them wrong. Here are the facts:
The Very Rich Don't Like Making Risky Investments
estimates that over 90% of the assets owned by millionaires are held in
a combination of low-risk investments (bonds and cash), the stock
market, and real estate. According to economist Richard Wolff
, about half of the assets of the richest 1% are held in unincorporated business equity
(personal business accounts). The Wall Street Journal
notes that over three-quarters of individuals worth over $20 million are invested in hedge funds.
(capital provided by affluent individuals for business start-ups) accounted for less than 1% of the investable assets
of high net worth individuals in North America in 2011.
The Mendelsohn Affluent Survey
confirmed that the very rich spend less than two percent of their money
on new business startups. The last thing most of them want, apparently,
is the risky business of hiring people for new innovation.
The Very Rich Don't Like Taking On Risky Jobs
CEOs, upper management, and financial professionals made up about 60 percent
of the richest 1% of Americans in 2005. Only 3 percent were entrepreneurs. A recent study
found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds.The biggest investment by corporations is overseas, where they keep 57 percent of their cash and fill their factories with low-wage workers. Commerce Department figures show that U.S. companies cut their work forces by 2.9 million from 2000 to 2009 while increasing overseas employment by 2.4 million.
In fact, the very rich may not care about U.S. jobs in any form. Surveys
reveal that 60 percent of investors worth $25 million or more are
investing up to a third of their total assets overseas. Back home, the
extra wealth created by the Bush
tax cuts led to "worst track record"
for jobs in recorded history. The true American job creator, as venture capitalist Nick Hanauer
would agree, is the middle-class consumer.
The Very Rich Corporations Don't Like Spending On America
How do corporations spend their money? To a good extent, they don't.
According to Moody's, cash holdings for U.S. non-financial firms rose 3
percent to $1.24 trillion
in 2011. The corporate cash-to-assets ratio
nearly tripled between 1980 and 2010. It has been estimated
that the corporate stash of cash reserves held in America could employ
3.5 million more people for five years at an annual salary of $40,000.
The top holders
of cash, including Apple and Google and Intel and Coca Cola and
Chevron, are spending their money on stock buybacks (which increase
stock option prices), dividends to investors, and subsidiary
acquisitions. According to Bloomberg
, share repurchasing is at one of its highest levels in 25 years.
Apple claims to have added 500,000 jobs
to the economy, but that includes app-building tech enthusiasts and
Fedex drivers delivering iPhones. The company actually has 47,000 U.S.
employees, about one-tenth of General Motors' workforce in the 1990s.
The biggest investment by corporations is overseas
, where they keep 57 percent
of their cash and fill their factories with low-wage workers. Commerce Department figures show
that U.S. companies cut their work forces by 2.9 million from 2000 to
2009 while increasing overseas employment by 2.4 million. They also tap
into a "brain drain"
of foreign entrepreneurs, scientists, and medical professionals rather than supporting education in America.
One last way corporations see fit to spend their money: executive
bonuses. Especially at the banks, where the extra stipends are often
paid for with zero interest loans
from the Federal Reserve.
The richest individuals and corporations are really good at building up
fortunes. They're even better at building up their "job creator" myth.
Paul Buchheit is a college teacher, an active member of US Uncut
Chicago, founder and developer of social justice and educational
websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the
editor and main author of "American Wars: Illusions and Realities
" (Clarity Press). He can be reached at paul@UsAgainstGreed.org.
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