Best of the Week
Most Popular
1.London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - Nadeem_Walayat
2. Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - Michael_Noonan
3.Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - Nadeem_Walayat
4.Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - Jim_Willie_CB
5.Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - Keith Markey
6.Gold Prices 2014: Do What Goldman Does, Not What It Says - David Zeiler
7.Bitcoin Price Strong Appreciation to Be Followed by Declines? - Mike_McAra
8.Gold Preparing to Launch as U.S. Dollar Drops to Key Support - Jason_Hamlin
9.Doctor Doom on the Fiat Money Empire Coming Financial Crisis - Andrew_McKillop
10.The Real Purpose Of QE - It’s Not Employment - Darryl_R_Schoon
Last 72 Hrs
Killing the Maximum-Wage Myth - 23rd Apr 14
U.S. Quarterly Economic Review - Optimism at the Fed - 23rd Apr 14
Why Mohamed El-Erian Left Pimco - Video - 23rd Apr 14
QE Is A Fraud Perpetrated By Made Men - 23rd Apr 14
Gold and Miners Outperform Once Again - 23rd Apr 14
G-20 and the US Tell the Bank of Japan to End Quantitative Easing - 23rd Apr 14
How to Get in the Trading Game and Profit - 23rd Apr 14
Fed Follies, U.S. Housing Market Fiasco - 23rd Apr 14
What Will December 31, 2014 Financial Headlines Look Like? - 23rd Apr 14
Why Gasoline Prices are Surging Again - 22nd Apr 14
Cold War 2.0 - 22nd Apr 14
The JIS – Junk Ideology Syndrome - 22nd Apr 14
How to Avoid Losing All Your Money - 22nd Apr 14
Silver Up, Stocks S&P Down - 22nd Apr 14
U.S. Mainstream Media Propaganda Setting the Stage for War With Pakistan - 22nd Apr 14
U.S. Interest Rates are NOT Rising! - 22nd Apr 14
A Crisis vs. the REAL Crisis: Keep Your Eye on the Debt Ball - 22nd Apr 14
Bitcoin Implications of Lack of Price Action - 22nd Apr 14
Japan - The Twilight Of The Rising Sun - 22nd Apr 14
Is This What a Credit Bubble Looks Like? - 22nd Apr 14
The Dark Side Of The Silver Mining Industry - 21st Apr 14
Strong U.S. Dollar Rally Could Pull Rug From Under Gold and Silver - 21st Apr 14
Silver Feeble Rally Fails to Hold Breakout, Falling Back Towards Support - 21st Apr 14
Stock Market Smart Money – All Out or More to Go? - 21st Apr 14
Fast Rising Pump Prices Counterattack - 21st Apr 14
Extreme Climate Change And Life On This Planet - 21st Apr 14
Gold and Silver Stocks Sitting Tight - 21st Apr 14
Stock Market Minor Correction Imminent - 21st Apr 14
Gold and Silver - Counting Blessings and Tender Mercies - 20th Apr 14 - Jesse
The CIA Through The Looking-Glass - 20th Apr 14 - Stephen_Merrill
Gold And Silver - Gann, Cardinal Grand Cross, A Mousetrap, And Wrong Expectations - 20th Apr 14 - Michael Noonan
Nikkei Stock Market - Sell Japan - 20th Apr 14 - WavePatternTraders

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Economic Recovery for the Few

Economics / Economic Recovery Aug 04, 2010 - 01:36 AM GMT

By: Submissions

Economics

Best Financial Markets Analysis ArticleRick Wolff writes: 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?

Rick 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 Rick 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.

© 2010 Copyright Rick Wolff - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014