How the rich get richer

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Every year, Forbes Magazine, which, like the Wall Street Journal and Fortune, is staple reading for corporate executives in America, publishes a list of the wealthiest 400 individuals and the 82 richest families in the United States. To qualify, a person must have a minimum net worth of $150 million. Families start at $200 million.

Writing in The New York Times of Oct. 11, 1984, Lester C. Thurow, professor of management and economics at the Massachusetts Institute of Technology, acknowledges, with the shock of new discovery, that the "400" control not only the economy but the political process in the United States:

"The list reveals a concentration of wealth that should trouble anyone concerned about the accumulation of economic power in the hands of the few."

The combined net worth of the 482 individuals and families is conservatively placed at $166 billion in business investment assets. Forbes reveals only part of the story. The sum of $166 billion does not include blind trusts or personal holdings, which include such things as private jets, yachts, multiple estate dwellings, priceless old masters, jewelry, and antiquities. Such items total billions of dollars in themselves.

Excluded as well is the virtual monopoly of the bond market, through which much of the private riches of America's ruling rich is sheltered and concealed. These assets, worth hundreds of billions of dollars, are hidden in banks, holding companies, insurance associations, and dummy corporations.

Ever-expanding wealth

There is a further dimension to great fortunes. That is the power of money to control still greater aggregates of capital. To take an example, $5 million can be leveraged through borrowing to a point where it controls as much as one hundred times its value. When the sum is as large as $100 million, billions can be borrowed to acquire income-generating corporate holdings, commercial operations, or vast real estate.

Since the people doing the original borrowing often have decisive holdings through intermediaries in the banks providing the "loans, this paper-shuffling amounts to a license to print money. Long before the principal is due it has generated earnings which pay it off many times over.

The power of such wealth is not merely self-perpetuating, it is constantly expanding and feeding upon itself. The average person on the Forbes list has either borrowed or controls a family foundation sheltering assets equal to his or her nominal net worth. The assets are thus doubled.

There is another aspect to the ruling-class sleight of hand. No corporation of substance requires more than a fraction of investment to secure its control. All of us have been told that there are millions of stockholders who "really run" the corporations. But this hides the fact that control never flows from 100percent ownership of corporate equity. Small concentrations of total equity permit the wealthy to control the conglomerates precisely because public offerings diffuse stockholdings.

The Pew family, for example, controls the huge Sun Oil Corp. by owning only 6 percent of its stock.

SOCIALIST ACTION FEBRUARY 1985 It commands corporate assets, holdings, earnings, leveraging power, and the capacity to dominate subsidiary and collateral markets through a mere 6 percent commitment of its own capital in the form of stock purchases.

In addition, the Pew family controls seven family foundations whose open (as opposed to concealed) assets are placed at $1.8 billion. These assets are not included by Forbes in the magazine's evaluation of net worth.

The implications of these interrelationships are stunning. The family foundations omitted by Forbes in its determination of net worth generate control of a minimum further equity of 26 percent. What this means is that the $166 billion of business net worth on the part of the Forbes 482 individuals and families gives them actual control of over $3.2 trillion in business assets alone. Just through declared business assets, the "482" own 40 percent of all fixed nonresidential private capital in the United States.

Yet even these holdings tell but a small part of the story. The U.S. Department of Commerce figures for 1984 disclose that 2 percent of the population own 50 percent of all common stock in America. But this is not all. Two percent of investors own 70 percent of all tax-exempt municipal bonds, 40 percent of all other bonds and stock, and 20 percent of all real estate.

When we exclude small holdings in real estate and calculate the percentage of substantial holdings owned by the 2 percent of the population, the figure of control jumps to 90 percent!

If we translate this kind of power into personal terms, we get some inkling of what it means. There are 12 billionaires on the Forbes list. If their avowed wealth alone were converted into an annuity, they would receive $630,000 every day for the rest of their lives.

The rich pay no taxes The ruling rich do something else. They assume command of the state and use its taxing power to finance the entire governmental apparatus, which serves to secure their control. They use the ability to force most people to sell their labor to pay a portion of the value produced in the form of wages. Then they take a sizable percentage of this meager portion in the form of taxation. The ruling rich themselves pay virtually no taxes.

The taxes of the working population are used by the ruling rich to finance a national apparatus of coercion in the form of armies of police and multiple spying services. The trillions of dollars which fund the Pentagon and its related coercive partners in the CIA, Defense Intelligence Agency, and the 12 other class.

The state, then, is the vehicle through which the power of our ruling class is expressed. It is also, of course, a colossal generator of riches for those who have created it. For the taxing power funds not only every state undertaking, but the trillions of dollars so exacted generate vast contracts for the ruling rich.

Officials in all major agencies and departments, such as Defense, Commerce, Treasury, Budget, and State, come from the very executives of the corporate sectors which receive billion-dollar contracts from these same agencies. Upon retirement from "national office" these functionaries return to the identical conglomerates they serviced while in "public" office.

The Bechtel Corp., to take an egregious example, is the largest construction conglomerate in the Middle East. Among the many functionaries supplied by Bechtel to the state are the secretaries of State and Defense and "trouble shooter" Philip Habib.

"One man, one vote"?

The power of the ruling rich translates into complete control of the political process and all of its principal organized expressions. Thurow's formulaton is rather succinct:

"Great wealth is accumulated to acquire economic power. Wealth makes you an economic mover and shaker. Projects will happen or not happen depending on your decisions. It allows you to influence the political process— elect yourself or others-and remold society in accordance with your views. To say that great wealth controls much of business America is not an exaggeration."

Nor is it an exaggeration to say that the business of state includes financial control of the political process. ABC television news analyst Charles Gibson reported on Oct. 24, 1984, that the Senate races had cost $100 million, the large bulk of which was supplied by "large corporations."

Much of this is transacted as a form of purchase, a rather public enactment of the bribe as a central modality of "political" life in America.

Of course, the poor on subsistence wages who steal to eat, serve long periods in prison when they are not gunned down by armored police units. The corporate rich, in contrast, are, for now, immune.

They are also immune to the mass famine and misery which afflicts the hundreds of millions of people who suffer the daily consequences of the power of the ruling rich in America.

"The Ship of State"" Bertrand Russell was fond of saying, "is a gang of pirates and the flag a skull and crossbones.

So it will remain until the state assembled by the rulers of America is dismantled and the 482 individuals and families cited by Forbes Magazine are scattered to the winds.