At the root of social movements around the world is the emergence, in the last three decades, of extreme inequalities of income, wealth and power. Chuck Collins argues that “we are the 99 percent” is a useful lens to understand these shifts – and that only a program of bold interventions will reserve these troubling trends.
Organizing in Response to the New Inequality
In the fall of 2011, a website emerged in the U.S. urging people to share a photograph and story of their experience being in the 99 percent. One young woman wrote,
I used to dream about becoming the first woman president. Now I dream about getting a job with health insurance.1
A twenty-seven-year-old U.S. veteran
of the Iraq War described how he enlisted in the military to protect the American people but discovered he “ended up making profits for politically connected contractors.”
I returned to a country whose economy had been devastated by bankers with the same connections and the same lack of ethics. . . . This is the second time I’ve fought for my country and the first time I’ve known my enemy. I am the 99 percent.2
One handwritten sign simply says:
I am twenty. I can’t afford college. There aren’t many jobs I qualify for, and the rest “just aren’t hiring.” Tell me, what exactly am I living for? I am the 99 percent.
On another website, organized to give voice to members of the 1 percent who support the 99 percent, an investment advisor named Carl Schweser wrote,
I made millions studying the math of mortgages and bonds and helping bankers pass the Chartered Financial Analyst Exam. It isn’t fair that I have retired in comfort after a career working with financial instruments while people who worked as nurses, teachers, soldiers, and so on are worried about paying for their future, their health care, and their children’s educations. They are the backbone of this country that allowed me to succeed. I am willing to pay more taxes so that everyone can look forward to a secure future like I do. I am the 1%. I stand with the 99%. Tax me.3
These are the stories that are propelling a new conversation in the United States and the world. The underlying conditions of debt, despair, low-wage jobs, persistent poverty and a collapsing middle class standard of living are not going away. Along with the stories, there are statistics like these:
• The 1 percent in the U.S. has 35.6 percent of all private wealth, more than the bottom 95 percent combined. The • 1 percent has 42.4 percent of all financial wealth, more than bottom 97 percent combined.4
• The 400 wealthiest U.S. individuals on the Forbes 400 list have more wealth than the bottom 150 million Americans.5
• In 2010, 25 of the 100 largest U.S. companies paid their CEO more than they paid in U.S. taxes. This is largely because a few thousand global corporations use offshore tax havens to dodge their U.S. taxes.6
• In 2010, the 1 percent in the U.S. earned over 21 percent of all income, up from 8 percent in 1979.7
• Between 1983 and 2009, over 40 percent of all wealth gains flowed to the 1 percent and 82 percent of wealth gains went to the top 5 percent. The bottom 60 percent lost wealth over this same period.
The world’s 1 percent, almost entirely millionaires and billionaires, own $42.7 trillion, more than the bottom 3 billion residents of earth.
While the middle-class standard of living implodes, sales of luxury items such as $10,000 wristwatches and Lamborghini sports cars are skyrocketing.
Between 2001 and 2010, the United States borrowed over $1 trillion to give wealthy taxpayers with incomes over $250,000 substantial tax breaks, including the 2001 Bush-era tax cuts.8
For decades, U.S. culture has had a high tolerance for these growing inequalities — in large part because of the belief that everyone had a chance to climb the ladder to success. The economic crisis of 2008, the “occupy movement,” and the eloquent cries of the “We are the 99 percent” movement have shattered this illusion of an opportunity society.
A Period of Extreme Wealth Inequality
For more than three decades, the United States has undertaken a dangerous social experiment: How much inequality can a democratic self-governing society handle? How far can we stretch the gap between the super-rich 1 percent and everyone else before something snaps?
The U.S. has pulled apart. Over a relatively short period of time, since the election of Ronald Reagan for U.S. President in 1980, a massive share of global income and wealth has funneled upward into the bank accounts of the richest 1 percent—and within that group, the richest one-tenth of 1 percent.
This has been not just a U.S. trend but also a global
tendency, as the wealthiest 1 percent of the planet’s citizens has delinked from the rest of humanity in terms of wealth, opportunity, life expectancy, and quality of life.
There has always been economic inequality in the world and within the United States, even during what is called the “shared prosperity” decades after World War II, 1947 to 1977. But since the late 1970s, we’ve entered into a period of extreme inequality, a dizzying reordering of society.
This radical upward redistribution of wealth was not a weather event but a human-created disaster. Segments of the organized 1 percent lobbied politicians and pressed for changes in the rules, rules governing such areas as trade, taxes, workers, and corporations. In a nutshell: (1) the rules of the economy have been changed to benefit asset owners at the expense of wage earners, and (2) these rule changes have benefited global corporations at the expense of local businesses. There has been a triumph of capital and a betrayal of work.
The story of the last three decades is that working hard and earning wages didn’t move you ahead. “Real income”— excluding inflation—has remained stagnant or fallen since the late 1970s. Meanwhile, income from assets has taken off on a rocket launcher. The dirty secret about how to get very wealthy in this economy is to start with substantial assets.
Most educated citizens in industrialized countries are aware, on some level, that the rich have gotten steadily richer. We’ve seen the reports about mansions being torn down to build new mega-mansions. Or corporate CEOs who are paid more in one day than their average employees earn in a year. We’ve watched the middle-class standard of living collapse and we’ve intuitively sensed a shift in the culture toward individualism and the celebration of excessive wealth while also witnessing an erosion of the community institutions that we all depend on, such as schools, libraries, public transportation, and parks.
These extreme inequalities have distorted all the arenas of life that matter – health, education, the environment, culture, housing, and the amount of free time you have. These growing inequalities of wealth, power, and opportunity interact in a frighteningly dynamic way to contribute to a downward spiral of worsening social, ecological, and economic conditions. Compounding inequalities are like a black hole, sucking the life energy out of our communities, destroying our health, livelihoods, wellbeing, and happiness.
The “99 to 1” framework is a powerful lens for people to situate their experience and understand what happened in our society and economy over the last several decades. It is a real demographic we can pinpoint and picture as well as a symbolic reference to those primarily responsible for the polarization of wealth in the economy.
The “1 percent” icon has obvious limitations, too. It suggests we should focus on wealthy individuals when we should be also be thinking about the roles of powerful global corporations and Wall Street. It also suggests that the 1 percent operate as a monolithic interest group. In reality, there are millions of people within the 1 percent are people who have devoted their lives to building a healthy economy that works for everyone.
The focus of our concern and organizing should be the “rule riggers” within the 1 percent—those who use their power and wealth to influence the game so that they and their corporations get more power and wealth.
Just as individuals in the 1 percent are diverse actors, the 1 percent of corporations are also not unified. There are several thousand multinational corporations—the Wall Street inequality machine—that are the drivers of rule changes. But they are the minority. There are millions of other built-to-last corporations and Main Street businesses that strengthen our communities and have a stake in an economy that works for the 100 percent. We must defend ourselves from the bad actors—the built-to-loot companies whose business model is focused on shifting costs onto society, shedding jobs, and extracting wealth from our communities and the healthy economy.
The benefits and privileges that flow to the 1 percent are, of course, not limited to just the 1 percent. There are people in the top 2 percent and even the top 20 percent who saw their wealth expand dramatically by virtue of the rule changes benefiting the super-rich.
The data demonstrate that the closer one is to the top of the economic pyramid, the larger one’s share of wealth and income. This is because income from investments, largely held by those in the top 1 percent, has been higher, whereas income from work and wages has stayed flat.
Who Are the 1 Percent?
So what does it take to join the 1 percent? How much wealth and income do they have? The U.S. population in 2010 was over 315 million people in 152 million households. So 1 percent of the population was roughly 3 million people in 1.5 million households.
There are a number of measures of what constitutes the 1 percent, including examining both annual income and wealth (the latter, also called net worth, being defined as what you own minus what you owe). These two groups-the top 1 percent of income and the top 1 percent of wealth-largely overlap, but not entirely. There are many with high incomes but low net worth. And there are many with vast wealth but relatively low incomes-at least according to their tax returns.
To join the top 1 percent of income earners, you must make over $500,000 per year. That’s the entrance level for the club. The average income of the 1 percent is $1.5 million.9
To join the top 1 percent of wealth holders, you must have a net worth (assets minus liabilities) over $5 million. The average wealth of someone in the top 1 percent is $14.1 million, according to an analysis of Federal Reserve data conducted by the Economic Policy Institute.10
These Inequalities Are Reversible.
Here’s the good news: we can reverse these extreme inequalities. Indeed, we did this once before, in the last century after the first Gilded Age. The seeds of a new social movement to reverse these wealth inequalities are sprouting across the planet.
We must change the rules of the economy so that it serves and lifts up the 100 percent, not just the 1 percent. Starting in the mid-1970s, the rules were changed to reorient the economy toward the short-term interests of the 1 percent. We can shift and reverse the rules to work for everyone.
Three Types of Rule Changes
There are three categories of policy changes that we need: rules and policies that lift the floor, those that level the playing field, and those that break up the overconcentration of wealth and unbridled corporate power. These are not hard and fast categories, but a useful framework for grouping different rule changes.
Rule Changes That Lift the Floor. Such policies lift the floor, reduce poverty, and establish a fundamental minimum standard of decency that no one will fall below. The Nordic countries – Norway, Sweden, Denmark, and Finland – have very low levels of inequality, and they are also societies with strong social safety nets and policies that lift the floor Examples of rule changes include:
• Ensure the minimum wage is a living wage.
• Universal health care.
• Basic labor standards and protections.
Rule Changes That Level the Playing Field
Policies and rule changes that level the playing field eliminate the unfair wealth and power advantages that flow to the 1 percent. Examples include:
• Investing in education.
• Reducing the influence of money in politics. Fair trade rules.
• Eliminating advantages for 1 percent global companies over 99 percent domestic businesses.
Rule Changes That Break Up Concentration of Wealth and Unbridled Corporate Power. We can raise the floor and work toward a level playing field, but we cannot stop the perverse effects of extreme inequality without boldly advocating for policies that break up excessive concentrations of wealth and corporate power.
For example, we cannot pass campaign finance laws that seek clever ways to limit the influence of the 1 percent, as they will always find ways to subvert the law. Concentrated wealth is like water flowing downhill: it cannot stop itself from influencing the political system. The only way to fix the system is to not have such high levels of concentrated wealth. We need to level the hill!
Bold Rule Changes
There are far-reaching policy initiatives that must be considered if we’re going to reverse extreme inequality. Some of these proposals have been off the public agenda for decades or have never been seriously considered.
Tax the 1 Percent. Historically, taxing the 1 percent is one of the most important rule changes that have reduced the concentration of wealth. Taxes on the wealthy have steadily declined over the last fifty years. If the 1 percent in the U.S. paid taxes at the same actual effective rate as they did in 1961, the U.S. Treasury would receive an additional $231 billion a year.11 In 2009, the most recent year for which data are available, 1,500 millionaires paid no income taxes, largely because they dodged taxes through offshore tax schemes, according to the IRS.12
Rein in CEO Pay. The CEOs of the corporate 1 percent are among the main drivers of the Wall Street inequality machine. They both push for rule changes to enrich the 1 percent and extract huge amounts of money for themselves in the process. But they are responding to a framework of rules that provide incentives to such short-term thinking. An early generation of CEOs operated within different rules and values—and they had a longer-term orientation.13
There is a wide range of policies and rule changes that could address the skewed incentive system that results in reckless corporate behavior and excessive executive pay. Ordinary taxpayers should not have to foot the bill for excessive executive compensation. And yet they do—through a variety of tax and accounting loopholes that encourage executive pay excess. These perverse incentives add up to more than $20 billion per year in forgone revenue.14 One example: no meaningful regulations currently limit how much companies can deduct from their taxes for the expense of executive compensation. The more firms pay their CEO, the more they can write off their federal taxes.
Stop Corporate Tax Dodging. There are hundreds of large multinational corporations that pay no or very low corporate income taxes.15 These include Verizon, General Electric, Boeing, and Amazon. A common gimmick of the corporate 1 percent is to shift profits to subsidiaries in low-tax or no-tax countries such as the Cayman Islands. They pretend corporate profits pile up offshore while their losses accrue in the United States, reducing or eliminating their company’s obligation to Uncle Sam. One strategic rule change would be for the U.S. Congress to pass the Stop Tax Haven Abuse Act, which would end costly tax games that are harmful to domestic U.S. businesses and workers and blatantly unfair to those who pay their fair share of taxes. The act would generate an estimated $100 billion in revenues a year, or $1 trillion over the next decade.
Break Up the Big Banks. Another set of rule changes would reverse the thirty-year process of banking concentration and support a system of decentralized, community-accountable financial institutions committed to meeting the real credit needs of local communities. We could limit the size of financial institutions to several billion dollars, and eliminate government preferences and subsidies to Wall Street’s too-big-to-fail banks in favor of the 15,000 community banks and credit unions that are already serving local markets.
Reengineering the Corporation with Federal Charter. Federal laws should redefine the social contract between corporations and society through a new federal charter that gives other stakeholders the right to fundamentally redefine the corporation. Most U.S. corporations are chartered at the state level, and a number of states, including Delaware, have such low accountability requirements that they are home to thousands of global companies. But corporations above a certain size that operate across state and international boundaries should be subject to a federal charter.
Without a bold program to address the concentration of wealth and corporate power, efforts to “raise the floor” and “level the playing field” will not be sufficient to reverse a generation of inequality.
About the author
Chuck Collins is a senior scholar at the Institute for Policy Studies (IPS). He co-edits the web resource,
www.inequality.org, an online portal for analysis and commentary. He is author of the book, 99 to 1: How Wealth Inequality is Wrecking the World and What We Can Do About It (Berrett Koehler Publishing, 2012). See www.99to1book.org
1.We are the 99 percent website, http://wearethe99percent.tumblr.com/post/12556818590/i-also-wanted-to-go-to-a-top-university-which-i (accessed January 3, 2012).
2.We are the 99 percent website, http://wearethe99percent.tumblr.com/post/
12639892423/i-am-a-27-year-old-veteran-of-the-iraq-war-i (accessed Jan 3, 2012).
3.We Stand with the 99 Percent website, http://westandwiththe99percent.tumblr.com/post/11849022824/i-made-millions-studying-the-math-of-mortgages-and (accessed January 3, 2012).
4.Sylvia A. Allegretto, “The State of Working America’s Wealth,” Economic Policy Institute Briefing Paper #292, March 23, 2011.
5.Sam Pizzigati, “The New Forbes 400—and Their $1.5 Trillion,” inequality.org, September 25, 2011, http://inequality.org/forbes-400-15-trillion (accessed January 3, 2012).
6.Sarah Anderson, Chuck Collins, Scott Klinger, and Sam Pizzigati, “The Massive CEO Rewards for Tax Dodging,” Institute for Policy Studies, September 2011, www.ips-dc.org/reports/executive_excess_2011_the_massive_ceo_rewards_
for_tax_dodging (accessed January 3, 2012).
7.Congressional Budget Office, “Trends in the Distribution of Household Income Between 1979 and 2007,” October 2011, www.cbo.gov/doc.cfm?index=12485Name (accessed January 3, 2012).
8.Kathy Ruffing and James Homey, “Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits,” Center on Budget and Policy Priorities, May 10, 2011, www.cbpp.org/cms/?fa=view&id=3490 (accessed January 3, 2012).
9.Sylvia A. Allegretto, “The State of Working America’s Wealth,” Economic Policy Institute, Briefing Paper #292, March 23, 2011.
10.Allegretto, “The State of Working America’s Wealth,” 10–14.
12.Amy Bingham, “Almost 1,500 Millionaires Do Not Pay Income Tax,” ABC News, Aug 6, 2011, http://abcnews.go.com/Politics/1500-millionaires-pay-income-tax/story?id=14242254#.TrwQYWDdLwN (accessed Jan 3, 2012).
13.David Callahan, Kindred Spirits: Harvard Business School’s Extraordinary Class of 1949 and How They Transformed American Business (Hoboken, NJ: Wiley, 2002).
14.Sarah Anderson, John Cavanagh, Chuck Collins, Mike Lapham, and Sam Pizzigati, “Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay,” Institute for Policy Studies, August 25, 2008, www.ips-dc.org/reports/executive_excess_2008_how_average_taxpayers_subsidize_runaway_pay (accessed January 3, 2012).
15.Nicholas Shaxson’s book, Treasure Islands. www.treasureislands.org