Shine some light on the US' invisible rich

RICH AND RICHER: Even the biggest US celebrities earn far less than the financial barons who really dominate the upper strata, like Warren Buffett.


    Sep 30, 2014

    Shine some light on the US' invisible rich

    HALF a century ago, a classic essay in The New Yorker, titled Our Invisible Poor, took on the then-prevalent myth that America was an affluent society with only a few "pockets of poverty". For many, the facts about poverty came as a revelation.

    I don't think the poor are invisible today, even though you sometimes hear assertions that they aren't really living in poverty: "Hey, some of them have Xboxes!" Instead, these days, it's the rich who are invisible.

    But wait - isn't half our TV programming devoted to the breathless portrayal of the real or imagined lifestyles of the rich and fatuous?

    Yes, but that's celebrity culture, and it doesn't mean that the public has a good sense of either who the rich are or of how much money they make. In fact, most Americans have no idea just how unequal their society has become.

    The latest piece of evidence to that effect is a survey asking people in various countries how much they thought top executives of major companies make, relative to unskilled workers.

    In the United States, the median respondent believed that chief executives make about 30 times as much as their employees, which was roughly true in the 1960s. But, since then, the gap has soared and CEOs today earn something like 300 times as much as ordinary workers.

    So Americans have no idea how much the Masters of the Universe are paid, a finding very much in line with evidence that the former underestimate vastly the concentration of wealth at the top.

    Is this just a reflection of the innumeracy of the hoi polloi? No - the supposedly well-informed often seem comparably out of touch.

    Until the Occupy movement turned the "1 per cent" into a catchphrase, it was all too common to hear prominent pundits and politicians speak about inequality as if it was mainly about college graduates versus the less educated, or the top fifth of the population versus the bottom 80 per cent.

    And even the 1 per cent is too broad a category; the really big gains have gone to an even tinier elite.

    For example, recent estimates indicate not only that the wealth of the top per cent has surged relative to everyone else - rising from 25 per cent of total wealth in 1973 to 40 per cent now - but also that the great bulk of that rise has taken place among the top 0.1 per cent, the richest one-thousandth of Americans.

    So how can people be unaware of this development, or at least unaware of its scale?

    The main answer, I'd suggest, is that the truly rich are so removed from ordinary people's lives that we never see what they have.

    We may notice, and feel aggrieved about, college kids driving luxury cars. But we don't see private-equity managers commuting by helicopter to their immense mansions in the Hamptons.

    The exceptions are celebrities, who live their lives in public. And defences of extreme inequality almost always invoke the examples of movie and sports stars.

    But celebrities make up only a tiny fraction of the wealthy, and even the biggest stars earn far less than the financial barons who really dominate the upper strata.

    For example, according to Forbes, Robert Downey Jr is the highest-paid actor in America, making US$75 million (S$96 million) last year. According to the same publication, the top 25 hedge-fund managers took home, on average, almost a billion dollars each last year.

    Does the invisibility of the very rich matter? Politically, it matters a lot.

    Pundits sometimes wonder why American voters don't care more about inequality; part of the answer is that they don't realise how extreme it is. And defenders of the super rich take advantage of that ignorance.

    When the Heritage Foundation tells us that the top 10 per cent of filers are burdened cruelly because they pay 68 per cent of income taxes, it's hoping that we won't notice the word "income". Other taxes, such as the payroll tax, are far less progressive.

    But it's also hoping you don't know that the top 10 per cent receive almost half of all income and own 75 per cent of the nation's wealth, which makes their burden seem a lot less disproportionate.

    If asked, most Americans say that inequality is too high and something should be done about it - there is overwhelming support for higher minimum wages, and a majority favour higher taxes at the top. But, at least so far, confronting extreme inequality hasn't been an election-winning issue.

    Maybe that would be true even if Americans knew the facts about our new Gilded Age. But we don't know that. Today's political balance rests on a foundation of ignorance, in which the public has no idea what our society is really like.