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THE RICH [image, unknown] Keynote

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[image, unknown] Dexter Tiranti
New Internationalist
[image, unknown] Editor: Dexter Tiranti

It's a rich man's world

Children of wealthy Mexicans at select private schools have to be guarded against kidnapping.
Photo: Steve Benbow / Camera Press

If the rich didn’t affect the rest of the world that would be fine. But their privileges mean the servility of others, their power the powerlessness of others, their superiority the inferiority of others. Dexter Tiranti explains just how they are on the take.

THE rich are generally all those who are better off than you and me. For the average African even the poorest Canadian is rich. To the Boston executive pulling $100,000 a year the controlling shareholder is rich. To the late Paul Getty no-one was rich if they could count their money.

But to the New Internationalist the rich are those who are powerful, those who belong to a particular economic class; those for whom ownership of land or business or investments means control over other people’s lives. Our societies tend to be divided - an owning class and a working class - or put more harshly, between, the exploiting and the exploited. For a working family, their wealth amounts to what they use a car, a hi-fl, maybe a house - plus whatever they have managed to save from their income. For the rich, wealth means assets far beyond personal use - and ultimately owning the fruits of other people’s labour.

Where do these assets of the rich come from? One thing is for sure: Hard work,’ according to American social scientist Michael Parenti, ‘seldom makes anyone rich.’ He goes on, ‘The secret to wealth is to have others work hard for you.’ While the real producers of wealth use their brains, brawn and initiative to create goods and services, company managers work to turn these energies to the advantage of the owners.

Closing the gap

But what’s the worry? Isn’t the gap between rich and poor being closed? We continually hear about the great bulldozer of equality which has been filling in the troughs of want and levelling the peaks of privilege. If only it were true. The facts on pages 9 and 10 tell a different story.

Business corporations are only legal institutions for the stockholders behind them. And stockholders are almost invariably among the very wealthy. Indeed one third of the top 500 corporations in the US are controlled by one individual or family. Names like Morgan, DuPont and Rockefeller dominate the US economy. The DuPonts, for instance, control ten corporations each with over ten billion dollars in assets including General Motors, Coca-Cola and United Brands. The family are trustees of scores of colleges, own 40 manorial estates and private museums in Delaware alone and have set up 31 tax-exempt foundations to make sure they keep their money in the family. In 1976 Pierre DuPont won the governorship of Delaware.

Compatriots of the DuPonts are the Rockefellers - holding over $300 billion dollars in corporate wealth that extends into every industry and every nation in the non-socialist world. The family controls five of the twelve largest oil companies and four of the largest banks in the world. They or their close associates have been President, Vice-President. Secretary of State, Commerce, Defence. Federal Reserve Board, governors of states and held key positions in the CIA and the US Senate.

In addition there are 60 other American families worth over a billion dollars, including Ford, Hunt, Kennedy and Hearst, headed-up by Daniel K Ludwig reputedly the world’s richest man (see MONEYMAKERS).

Along with the increasing concentration of business - the continual round of mergers on the stock exchange-has gone an increasing concentration of power in fewer and fewer hands. Quite typical is the UK. There is a tiny group who control most of the country’s wealth, administer its industry and property and exert a powerful influence over government. At the heart of this concentration of power is the City of London. ‘It is too often forgotten,’ said Sir Arthur Knight, former chairman of Courtaulds, ‘that 80 per cent of our manufacturing industry is run by 400 firms; in each of which three or four people are responsible for the key strategic decisions - say 1,500 people at most. And in the investing industry (the banks, pension funds and insurance companies), I would guess that the number of key individuals is even smaller.’

The control of so much by so few is encouraged by the practice of multiple directorship - being director of several companies at the same time. A study of 85 large UK corporations found 73 of them linked by shared directorships. Eleven directors on the board of British Petroleum were found to hold 39 other directorships including the Board of the Bank of England. And the 150 directors of the ten main insurance companies hold 1.543 other directorships between them. Conflict of company interests through anything as unseemly as informal competition can be smoothed over with a cosy chat.

Apologists and the hired hands of the privileged will tell us that this is all an exercise in envy and sour-grapes. Yet our concern is not that the rich have a limousine while we drive a Ford, they have servants while we use a washing machine. Our concern with the rich is because of the system that makes them rich. The rich preside over this inequality and benefit from it. • They profit in dividend share-outs from our work; • they use our savings to their advantage; • they deploy government money, our money, in their direction at the expense of more publicly beneficial projects; • they pay less in taxes, meaning we pay more; • they control our governments and expropriate our democracy; . they perpetuate their advantage through inheritance.

Control of savings

Most of the savings of humble people are tied up in the banks, the pension funds and insurance companies. Nominally this wealth is owned by millions of ordinary people: in reality the power of wealth is transferred to those who run the savings institutions. In the UK around 200 people have the authority to decide on the investment of two-thirds of the S40 billion worth of money contributed to private pensions. More than $44 billion of the country’s S55 billion worth of insurance funds is controlled by 30 insurance companies and four banks account for 70 per cent of all our bank deposits. When deciding where the money should be invested, the decisionmakers make highly subjective judgements … a subjectivity coloured by the values of the rich - through their buying and selling of stock. These few control when companies should sell out, create redundancies or invest in automation. It is they who decide to ship our money out of the country if we have elected a wrong’ government or to invest in totalitarian regimes from South Africa to Singapore, South Korea to Brazil.

Diverting government funds

Our money, taxpayers money, can be used to fund the wealthy more directly through the companies they control. Make no mistake, when you help the big corporations, in reality you help the owners. American taxpayers in fact, are famous for their ‘welfare’ programmes to the country’s giant corporations. Just about every major American industry collects direct subsidies or benefit-in-kind subsidies. These total $30 billion annually. Large commercial farms (usually owned by the giant corporations) are paid to keep land unfarmed or surplus crops bought up to maintain crop prices. Among the unlikely recipients of such agricultural subsidies were the giant oil companies-substantial owners of American farming land and the richest person in Britain - the Queen. According to the New York Times, she collected $68.000 from the American taxpayers in the 1970s for not producing anything on her plantation in Mississippi.

Avoiding tax paying

A more indirect way the rich take funds from the poorer members of society is through tax dodging - for this just pushes the tax burdens onto the shoulders of those less able to bear it. The sensible position that tax liability should be related to a person’s ability to pay is made senseless. And the suggestion that income which doesn’t require any time or effort in the making (from rent, dividends or other interest on capital) should be taxed more than income from working. is laughed out of court. In practise, earned income is taxed more heavily than unearned income; those at the bottom of the tax scale are taxed more heavily than those at the top (see Tax Dodging - how those who have it, keep it. Page 18). In 1949 in Britain, the top 10 per cent of taxpayers contributed 75 per cent of all income tax; 30 years later they only paid a third. This has happened as almost 60 per cent of all taxable income has escaped through allowances and avoidance engineered by sharp accountants using convenient loopholes.

The same trend is mirrored on the other side of the Atlantic. In fact Reagan’s budgets prompted the New York Times to editorialise that the 1983 tax laws ‘gie a bushelful of money to some of the richest individuals,’ while leaving the Federal Budget deep in the red for the rest of the decade, guaranteeing high interest rates and recurring frantic battles to cut even more from the Federal program... for the nation as whole there is virtually nothing to celebrate. ‘Certainly not for the 32 million Americans who, according to the US Census Bureau figures for 1983, are on or below the poverty line.

Taking our political power

The taking process works through the democratic political machinery too. It’s absurd to think that universal suffrage and political democracy stands for much when there isn’t economic democracy too. For of course those with money use their power in the political process. As Michael Parenti says, rich with irony. ‘Democratic rights allow both rich and poor to raise their political voices; both are free to hire the best placed lobbyists and Washington lawyers to pressure public office holders, both are free to shape public opinion by owning a newspaper or TV station, both have the right to engage in multimillion dollar election campaigns to pick the right people for office or win office themselves.’ Small wonder that in all Western democracies the party of business - despite representing minority interests a - should have been the major party of government this century.

The full power of the communication industry, owned and controlled by the rich, also weighs in on the side of the natural’ party of government. Very expensive advertising agencies are hired. They use every psychological trick to persuade the Main Street punter to buy the right product or vote the right way. And of course there are election funds. One side of the political spectrum - the right side - will be awash with donations. Those less friendly to the privileged; those who suggest more taxation for the wealthy and more welfare for the deprived, will have to make do on a wing and a prayer.

Political horsetrading - giving electoral donations in return for ‘favours’ - reaches its peak in the US. Most of the favours will involve the wealthy putting their hands in the till. For instance, the Daily News tells us that one of the first acts of Ronald Reagan’s administration on coming to office was to deregulate oil and gasoline prices - a $50 billion gift in return for the $200 million the oil companies gave his 1980 presidential election campaign. This was money directly taken from the pockets of ordinary Americans.

Even unto death...

Even unto death and beyond, the effects of wealth are apparent to the living. In 1979 a worldwide truism was substantiated by the UK Royal Commission on Incomes and Wealth. It is the solid buttress of inheritance which keeps the plutocratic castle so firmly in place. Half the rich men, it was found, had rich relatives who had left them substantial assets. And there was more than a three to one chance that rich women had relatives or friends who had left them their money.

‘It is the system of inheritance which serves to generate and perpetuate the greatest inequalities,’ said British historian RH. Tawney. And once you have inherited, you have to be very silly not to make more. Time the magic of compound interest and an establishment that favours the wealthy will do the rest. As the Persian proverb goes, The larger a man’s roof, the more snow it will collect.’ There are many examples of the self-made, rags-to-riches fairy tale. But what makes them worth telling is that they are the exception.

The more orthodox riches-to-riches story is that of Paul Getty, fortunate enough to have a successful attorney and oilman as his father, leaving him an estate of $15 million. Or Malcolm Forbes, inheritor and publisher of the millionaire house journal Forbes. The publication now generates an annual $10 million and allows him a lifestyle which includes a yacht the size of a small liner, and eight major residences including ones in Bali and Tahiti. Ask him how he became so rich and the answer is always the same. ‘Sheer industry and ability - you spell those ‘, words i-n-h-e-r-i-t-a-n-c-e’.

Much of the sadness and sickness of our world must lie at the door of wealth - and the lack of it. This sadness and sickness is for those who have too much as well as those with not enough. The resentment of a deprived society finds its most twisted manifestation in the Baader-Meinhof kidnapping of Hans-Martin Schleyer, president of West Germany’s Federation of Industries in 1977. His body was found 44 days later in the boot of a car. Or take the British businessman Rolf Schild, kidnapped with his family when holidaying in Sardinia. The kidnappers, unfamiliar with the name, thought he was part of the Rothschild family. These instances must send a collective frisson of fear down the spines of the wealthy. Their only real protection is not to live as recluses behind armed guard, but to pretend to be poor. If you have to pretend to be what you are not to live normally, it might be better for all if the pretence were dropped for the real thing.

History,’ wrote Martin Luther King from Alabama’s Birmingham City Jail in 1963. ‘is the long and tragic story of the fact that privileged groups seldom give up their privileges voluntarily. It’s doubtful whether the rich will be swayed by the New Internationationalist’s case. The alternative is for us to change the world economy - to fight for progressive taxation, for active participation in the running of the workplace, for an end to gross imbalance of privilege. The aim is ambitious, but it is far less dangerous than cynicism and world-weariness. For our constraints lie in our perceptions, not in our resources.

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