Where is this elusive recovery? The banks, some say, have “recovered.” Yet they remain dependent on Washington, they do not make the loans needed for a general recovery, and many medium and small banks keep collapsing. The stock market shows no recovery. The Dow index was 14,000 in late 2007 when capitalism hit the fan, and it is around 10,000 now. The Nasdaq market index was 2800 then and is 2300 now. Everywhere else — unemployment, foreclosures, bankruptcies, depressed housing market, and so on — no recovery in sight. Yet, my search finally found genuine recovery for one group, and its recovery offers a better policy to treat this crisis.
Every year, two major companies catering to rich investors co-author a survey of their clients. Capgemini and Merrill Lynch Wealth Management’s World Wealth Report covers the two groups that interest them: High Net Worth Individuals (HNWIs) and Ultra-High Net Worth Individuals (Ultra-HNWIs). The first group counts all individuals with at least $1 million of “investible assets” in addition to the values of their primary residence, art works, collectibles, etc. The second group includes individuals with at least $30 million of such investible assets.
Their latest Report, covering the year 2009, finds 10 million HNWIs in the world that year: 3.1 million in North America, while Europe and Asia-Pacific each had 3.0 million. The rest of the world had a mere 0.9 million of the rich and richer.
The 10 million HNWIs — in a global population of 6.8 billion in 2009 — amounted to 0.14 per cent of the earth’s people. Together, they owned a total of $39 trillion in “investible assets.” To see what this means: in 2009, the US GDP (total output of goods and services) was $14.6 trillion. The combined GDPs of the world’s 9 richest countries (US, Japan, China, Germany, France, UK, Italy, Russia, and Spain) totaled less in 2009 than the investible assets of the world’s HNWIs.
During 2009, as tens of millions lost their jobs, the number of HNWIs rose by 17.1 per cent and their combined wealth rose by 18.9 per cent. They had a genuine “recovery.” HNWIs regained in wealth most of what they lost in 2008. No wonder they celebrate “recovery” while the rest of the world wonders (or rages at) what they are talking about. In the US, for example, the HNWI population grew by 16.6 per cent in 2009 while the US GDP fell by 2.4 per cent.
Only 1 per cent of all HNWIs were Ultra-HNWIs, but what a group that was and is. Ultra-HNWIs alone owned 35.5 per cent of the $39 trillion owned by all 10 million HNWIs. And they recovered more during 2009 than their fellow HNWIs.
Capitalism is the name of the global economic system that delivers the outcomes summarized in these numbers. Capitalism produces “recovery” for those who need it least while offering austerity for nearly everyone else. Today’s business and political leaders tell the people of all advanced industrial countries that there is no alternative to years of government budget austerity (raised taxes and/or reduced government employment and services).
They don’t explain that they could tap instead the immense wealth of the richest 0.14 per cent who (a) made huge gains in wealth over the last 25 years, and (b) already recovered in 2009 what they had lost in 2008.
What notions of fairness, decency, ethics, or democracy could justify such economic performance, especially in a time of global economic crisis? Recall as well that these same rich and richer people contributed so significantly (as industrial employers, bankers, and investors) to generating that global economic crisis.
Let’s now concentrate on the HNWIs in just the US (including its Ultra-HNWIs). They numbered 2.9 million in 2009: well under 1 per cent of US citizens. Their investible assets totaled $12.09 trillion. For 2009, the total US budgetary deficit was $1.7 trillion. Had the US government levied an economic emergency tax of a modest 15 per cent on only the HNWI’s investible assets, it could have erased its entire 2009 deficit. Over 99 per cent of US citizens would have been exempted from that tax.
The European, Japanese, and other governments could have treated the crisis likewise in their countries. Then governments would not have had to borrow trillions. They would instead have taxed the super rich tiny minority a small portion of its immense wealth. Those governments would not then have had to turn to lenders (often those same super rich). There would be no current “sovereign debt crisis” in Greece, Portugal, Spain, Ireland, etc., and no need for the resulting austerities to satisfy those lenders. Republicans would have no “deficit, deficit” drum to beat hoping for election-day gains.
Taxing the HNWIs and Ultra-HNWIs would be the policy of governments responsive to the needs of their working-class majorities instead of their rich and super-rich patrons. Austerity is not the only policy. Modestly taxing the wealth of HNWIs is the far better policy choice. The two wealth management companies that cater to HNWIs have kindly provided us all with the facts and figures needed to support the better policy.
Across Europe, coalitions of trade unions, socialist, communist, and some green parties, and many social, religious, and community organizations are organizing growing mass demonstrations and general strikes. These oppose austerity and demand alternative ways to deal with economic crisis. In France, mobilization focuses on a nationwide general strike September 7. Plans are underway for an all-European day of public actions on September 29. National actions like this have already happened in Greece, Portugal, and other countries.
The business and political leaders generated by the last 30 years of neoliberal capitalism simply assumed that they could impose the costs of their crisis on their countries’ people. That assumption is now being contested. The European people are beginning to fight back. And here, in the US?
Richard D. Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York. He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications. Check out Richard D. Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com. Visit Wolff’s Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.