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“Where wealth accumulates, men decay”*

One long, brutal game of musical chairs…

It’s easy to place the blame for America’s economic woes on the 0.1 percent. They hoard a disproportionate amount of wealth and are taking an increasingly and unacceptably large part of the country’s economic growth. To quote Bernie Sanders, the “billionaire class” is thriving while many more people are struggling. Or to channel Elizabeth Warren, the top 0.1 percent holds a similar amount of wealth as the bottom 90 percent — a staggering figure.

There’s a space between that 0.1 percent and the 90 percent that’s often overlooked: the 9.9 percent that resides between them. They’re the group in focus in a new book by philosopher Matthew Stewart, The 9.9 percent: The New Aristocracy That Is Entrenching Inequality and Warping Our Culture.

There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. They want to live in great neighborhoods, even if that means keeping others out, and will pay what it takes to ensure their families’ fitness and health. They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. They believe in markets. They’re rich, but they don’t feel like it — they’re always looking at someone else who’s richer.

They’re also terrified. While this 9.9 percent drives inequality — they want to lock in their positions for themselves and their families — they’re also driven by inequality. They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them…

America’s upper-middle class works more, optimizes their kids, and is miserable: “The problem with America’s semi-rich“– Emily Stewart (@EmilyStewartM) talks with Matthew Stewart.

* Oliver Goldsmith

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As we rethink requisites, we might recall that it was on this date in 1851 that Richard Bentley, a London publisher, released The Whale, by Herman Melville in a printing of 500 copies. About a month later it was published (in a slighted different version) in the U.S. under its better-known title, Moby Dick.

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“All the animals, the plants, the minerals, even other kinds of men, are being broken and reassembled every day, to preserve an elite few, who are the loudest to theorize on freedom, but the least free of all”*…

To be sure the 1% deserves scrutiny, but there is another– much larger– kind of elite entrenched across the U.S…

American wealth and power usually have a certain look: glass-walled penthouse apartments in glittering urban skyscrapers, sprawling country mansions, ivy-covered prep schools, vacation homes in the Hamptons. These are the outward symbols of an entrenched oligarchy, the political-economic ruling class portrayed by the media that entertains us and the conspiracy theories that animate the darker corners of the American imagination.

The reality of American wealth and power is more banal. The conspicuously consuming celebrities and jet-setting cosmopolitans of popular imagination exist, but they are far outnumbered by a less exalted and less discussed elite group, one that sits at the pinnacle of the local hierarchies that govern daily life for tens of millions of people. Donald Trump grasped this group’s existence and its importance, acting, as he often does, on unthinking but effective instinct. When he crowed about his “beautiful boaters,” lauding the flotillas of supporters trailing MAGA flags from their watercraft in his honor, or addressed his devoted followers among a rioting January 6 crowd that included people who had flown to the event on private jets, he knew what he was doing. Trump was courting the support of the American gentry, the salt-of-the-earth millionaires who see themselves as local leaders in business and politics, the unappreciated backbone of a once-great nation.

These elites’ wealth derives not from their salary—this is what separates them from even extremely prosperous members of the professional-managerial class, such as doctors and lawyers—but from their ownership of assets. Those assets vary depending on where in the country we’re talking about; they could be a bunch of McDonald’s franchises in Jackson, Mississippi; a beef-processing plant in Lubbock, Texas; a construction company in Billings, Montana; commercial properties in Portland, Maine; or a car dealership in western North Carolina. Even the less prosperous parts of the United States generate enough surplus to produce a class of wealthy people. Depending on the political culture and institutions of a locality or region, this elite class might wield more or less political power. In some places, it has an effective stranglehold over what gets done; in others, it’s important but not all-powerful.Wherever these elites live, their wealth and connections make them influential forces within local society. In the aggregate, through their political donations and positions within their localities and regions, they wield a great deal of political influence. They’re the local gentry of the United States.

These folks’ wealth extends into the millions and tens of millions rather than the billions we typically associate with the world-shaping clout of international oligarchs. There are, however, a lot more of them than the global elites who get all of the attention. They’re not the faces of instantly recognizable brands or the subjects of award-winning New York Times profiles; they own warehouses and Applebee’s franchises, concrete companies and movie-theater chains, hops fields and apartment complexes.

Because their wealth is rooted in the ownership of physical assets, they tend to be more rooted in their place of origin than the cosmopolitan professionals and entrepreneurs of the major metro areas are. Mobility among major metros, the characteristic jumping from Seattle to Los Angeles to New York to Austin that’s possible for younger lawyers, creatives, and tech folks, is foreign to them. They might really like heading to a vacation home in Bermuda or Maui. They might plan a relatively early retirement to a wealthy enclave in Palm Springs; Scottsdale, Arizona; or Central Florida. Ultimately, however, their money and importance comes from the businesses they own, and those belong in their locality.

Gentry classes have been a common feature of a great many social-economic-political regimes throughout history. Pretty much anywhere you have a hierarchical form of social organization and property ownership, an entrenched gentry class of some kind emerges. In the course of working on my doctorate in history and years of research for my podcast, Tides of History, I’ve come across many different gentries, each with its own ideas about its legitimacy, role in society, and relationship to those above and below on the social scale: the local civic elites of the Roman Empire, the landlords of late Han China, the numerous lower nobility of late medieval France, the thegns of Anglo-Saxon England, the Prussian Junkers, and the planter class of the antebellum South. The gentry are distinct from the highest levels of a regime’s political and economic elite: They’re usually not resident in the political center; they don’t hold major positions in the central administration of the state (whatever that might consist of); and they aren’t counted among the wealthiest people in their polity. New national or imperial elites might develop over time from a gentry class, even rulers—the boundaries between these groups can be more or less porous—but that’s not typically the case.

Gentry are, by definition, local elites. The extent to which they wield power in their locality, and how they do so, is dependent on the structure of their regime. In the early Roman Empire, for example, local civic elites were essential to the functioning of the state. They collected taxes in their home city, administered justice, and competed with one another for local political offices and seats on the city council. Their competition was a driving force behind the provision of benefits to the common folk, in the form of festivals, games, public buildings, and more basic support, a practice called civic euergetism.

When we talk about inequality, we skew our perspective by looking at the most visible manifestations of it: penthouses in New York, mansions in Beverly Hills, the lavish wastefulness of hedge-fund billionaires or a misbehaving celebrity. But that’s not who most of the United States’ wealthy elite really are. They own $2 million houses on golf courses outside Orlando, Florida, and a condo in the Bahamas, not an architecturally designed oceanfront villa in Miami. Those billionaires (and their excesses) exist, but they’re not nearly as common as a less exalted category of the rich that’s no less structurally formative to our economy and society.

An enormous number of organizations and institutions are dedicated to advancing the interests of this gentry class: chambers of commerce, exclusive country clubs and housing developments, the American Society of Concrete Contractors, and fruit growers’ associations, just to name a small cross section. Through these organizations and their intimate ties to local and state politics, the gentry class can and usually does wield significant power to shape society to its liking. It’s easy to focus on the massive political spending of a Sheldon Adelson or Michael Bloomberg; it’s harder, but no less important, to imagine what kind of deals about water rights or local zoning ordinances are being struck across the U.S. on the eighth green of the local country club.

Some people work their way into this property-holding gentry class by virtue of their blood, sweat, and sheer gumption. That’s one variant of the American dream: the belief that hard work and talent, and maybe a bit of luck, can take a person into the ranks of the elite. But far more members of the gentry class are born into it. They inherit assets, whether those are car dealerships, apple orchards, or construction companies, and manage to avoid screwing things up. Managers run their companies, lawyers look over their contracts, accountants oversee their finances, but they’re the owners, whether or not they’ve done a single thing of their own volition to accumulate those assets. This is broadly true of gentry classes: They’re hereditary. Large amounts of property of any kind form a durable base for generational wealth, whatever specific shape it might take. The American gentry class isn’t entirely closed to new blood, but it, too, is hereditary.

Equating wealth, especially generational wealth, with virtue and ability is a deeply American pathology. This country loves to believe that people get what they deserve, despite the abundant evidence to the contrary. Nowhere is this more obviously untrue than with our gentry class.

The American gentry stands at the apex of the social order throughout huge swaths of the country. It shapes our economic and political world thanks to its resources and comparatively large numbers, yet it’s practically invisible to the popular eye.

Forget the skyscrapers and opulent country mansions, the elite family dynamics of Succession and the antics of the Kardashians and Kardashian-adjacent; look instead to the far more numerous multimillion-dollar planned golf-course communities and their controlling homeowners’ associations. Think about the informal property-development deals struck between sweating local grandees at the country-club bar in Odessa, Texas, or Knoxville, Tennessee.

Power resides in gated communities and local philanthropic boards, in the ownership of staggering numbers of fast-food franchises, and in the smooth transmission of a large construction company’s assets to a new generation of small-yacht owners. Power can be found in group photos of half-soused, overweight men in ill-fitting polo shirts, and in the millionaires ready and willing to fly their private jets to Washington, D.C., in support of a certain would-be authoritarian. The yeoman developer of luxury condominiums, the single-digit-millionaire meatpacking-plant owner, the property-management entrepreneur: These were the people who, remembering or inventing their tradition of dominance over their towns and cities, flocked to Make America Great Again. As much as the United States loves to think of itself as an egalitarian paradise open to talent of any stripe, hierarchy and local power are no less the American way.

American Gentry“: the jet-setting cosmopolitans of popular imagination exist, but they are far outnumbered by a less exalted and less discussed elite group, one that sits at the pinnacle of America’s local hierarchies. From the invaluable Patrick Wyman (@Patrick_Wyman) , author of The Verge, newsletter writer– both of which are eminently worthy of reading, as is the full article excerpted above.

* Thomas Pynchon, Gravity’s Rainbow

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As we ponder privilege, we might recall that it was on this date in 1962 that Rachel Carson’s Silent Spring was published. A pioneering study of the long-term dangers of pesticide use, it challenged the practices of agricultural scientists and the government, and called for a change in the way humankind relates to the natural world.

Carson documented her accusations that the chemical industry spread disinformation, and that public officials accepted those marketing claims unquestioningly. Unsurprisingly, the book was met with fierce opposition by chemical companies; but, thanks to public opinion, it sparked numerous changes: it led to a reversal in the United States’ national pesticide policy, and a nationwide ban on DDT for agricultural uses, and helped to inspire an environmental movement that led to the creation of the U.S. Environmental Protection Agency.

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“The combination of economic inequality and economic segregation is deadly”*…

When we think of a social safety net, we tend to think about things like health care and environmental protection, social security, child care; lately here’s been lots of talk of Universal Basic Income. All of them are surely part of an answer. But if we want a social infrastructure that not only protects against personal and family challenges, but also creates personal and family opportunities, we need to look further– we need to look to something we might call Universal Basic Assets. The always-illuminating Rana Foroohar explains…

If American states are, as former US Supreme Court Justice Louis Brandeis once put it, the “laboratories of democracy,” then it’s worth watching closely what’s happening in California right now.

The threat of rising taxes and a “soak the rich” political atmosphere has led some wealthy Golden State residents, including a number of technology entrepreneurs, to leave for cheaper pastures such as Austin or Miami. This has, in turn, prompted worries of a larger migration that would have an impact not only on the state’s tax base, but on the growth and innovation that have made California the world’s fifth-largest economy.

It is an exceptionally fraught situation. While nobody these days has much sympathy for wealthy individuals or companies (witness the recent justified fury about the ProPublica leaks showing how little tax the wealthiest Americans pay), or really believes in trickle-down economics, the threat of tax and regulatory arbitrage by other states is real.

The good news is that California is applying some typically creative thinking to the problem. What if there was another way to harness company and citizen wealth for the benefit of all?  

One such idea gaining popularity is what has been called “pre-distribution.” Unlike traditional methods of redistribution, in which the state taxes existing wealth and then uses it to bolster various projects and constituents, pre-distribution is all about harnessing capital the same way investors do, and then using the proceeds of the capital growth (which as we know far outpaces income growth) to fund the public sector…

It could help better align public and private incentives and rewards. The massive wealth accrued by leading companies is in part down to the strength of the public commons — good schools, decent infrastructure, basic research, and so on. As economists like Mariana Mazzucato frequently note, why should taxpayers pick up the bill for, say, laying high speed fibre without getting any of the commercial upside?

California Senate majority leader Robert Hertzberg, a Democrat… along with some very rich Californians like former Google chief executive Eric Schmidt and Snap founder Evan Spiegel, have proposed… something called “universal basic capital”. The idea is that seed contributions of equity from companies or philanthropists could be invested into a fund that would then be used by individual Californians for things like retirement security, healthcare and so on…

If pre-distribution works in the laboratory of California, I expect it will be adopted in some way at the federal level. The Obama administration actually tried to implement its own version of the CalSavers programme for the country as a whole, called myRA, but it failed in part because the funds were invested only in super safe low yielding Treasury bills at a time when the market as a whole was rising far faster. Even at this politically polarised moment, it’s an idea whose time may have come. Pre-distribution is supported by such unlikely bedfellows as hedge funder Ray Dalio and leftwing economist Joseph Stiglitz. Perhaps that’s because while it doesn’t fundamentally alter the market system, it does broaden share ownership: a mix of capitalism and socialism that is right for our time…

Capital for the people — an idea whose time has come“: @RanaForoohar explains how California’s nascent experiments in Universal Basic Assets could be a model for the nation.

In thinking about national possibilities, your correspondent’s favorite rationale/approach is Cornell economic historian Louis Hyman‘s formulation (toward the end of) this post.

* “The combination of economic inequality and economic segregation is deadly. It reinforces the advantages of those at the top while exacerbating and perpetuating the disadvantages of those at the bottom. Taken together, they shape not just inequality of economic resources, but also a more permanent and dysfunctional inequality of opportunity.” – Richard Florida

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As we share and share alike, we might send grateful birthday greetings to the Electronic Frontier Foundation; it was founded by John GilmoreJohn Perry Barlow, and Mitch Kapor on this date in 1990. Over the last 30 years, EFF has become the leading nonprofit defending digital privacy, free speech, and innovation.

Happy Birthday– and many more!

“An imbalance between rich and poor is the oldest and most fatal ailment of all republics”*…

… so, how we measure it matters…

In 2015, Greece, Thailand, Israel, and the UK were equally unequal. That is, all four countries had the same Gini coefficient, a common measure of income inequality.

The number suggests that the spread of incomes in the four nations was the same. However, a close look at the poorest and wealthiest in those societies reveals a very different picture. The ratio between income held by the richest 10% and the poorest 10% ranged significantly, from 13.8 in Greece to 4.2 in the UK. 

The fact is, just because the Gini coefficient is so well known doesn’t mean it’s a particularly useful measurement. Its appeal comes from its simplicity—a number between 0 and 1 that can encapsulate a complex distribution in a single figure—as well as its popularity. It is also regularly published and updated by powerful international organizations like the OECD, the World Bank, and the International Monetary Fund

However, it has a number of serious limitations. So many, in fact, that the World Inequality Database, one of the world’s leading sources of income inequality data, steers clear. And it’s not alone. While some economists defend the Gini coefficient’s continued use, most agree that as a way to understand income inequality, it’s insufficient on its own…

A primer on the dominant measure of economic inequality, and on some alternatives/supplements to it: “Gini coefficient: An introduction.”

* Plutarch

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As we aim to understand, we might note that today is the Summer Solstice, the day on which the earth’s north pole is maximally tilted toward sun, and there are more hours of daylight than on any other day of the year (in the Northern Hemisphere; in the Southern, it is the Winter Solstice, the shortest day). The June solstice is the only day of the year when all locations inside the Arctic Circle experience a continuous period of daylight for 24 hours. And perhaps more immediately, it is the “official” start of Summer.

(The 21st is the traditional date; in the event, the solstice falls on the 20th, 21st, or 22nd– this year, on the 20th… still, the traditional date is the one folks tend to mark.)

Not coincidentally, today is also National Daylight Appreciation Day.

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“Justice is not the work of the law: on the contrary, the law is only the declaration and application of what is just in all circumstances where men have relations with one another”*…

This essay proposes a new model of personal and public wealth-building that can address the current crisis of inequality in the United States. We place contemporary American wealth inequality into its historical context by tracing how federal government policies have worked to support personal and public wealth building across three periods: the First Industrial Revolution of the mid-19th century, the Second Industrial Revolution of the early 20th century, and the Information and Communication Technology revolution of the late-20th century. We then suggest a series of potential governmental policies that can help to ensure a more equitable wealth distribution in the future. Our proposed “mutualist” model of political economy would allow for the large-scale diffusion of productivity gains that may follow the installation of deployment of the next wave of general-purpose technologies. This new social contract will move beyond the welfare state’s focus on insurance toward a more radical notion of shared ownership of returns on capital via universal individual capital endowments and new public investment channels that control shares in firms and intellectual property…

Addressing inequality in the U.S.: “The Mutualist Economy: A New Deal for Ownership“– Nils Gilman (@nils_gilman) and Yakov Feygin (@BuddyYakov) offer a powerfully-provocative proposal.

They join a growing chorus. See also, e.g., Louis Hyman (toward the end of this essay) and Lynn Forester de Rothschild (in this interview).

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Pierre-Joseph Proudhon, describing an ideal state

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As we rethink what isn’t working, we might send gilded birthday greetings to Johns Hopkins; he was born on this date in 1795. A businessman who is largely remembered as a philanthropist, he operated wholesale and retail businesses in the Baltimore area; he built his fortune by judiciously investing his proceeds in myriad other ventures, most notably, the Baltimore and Ohio (B & O) Railroad. In 1996, Johns Hopkins ranked 69th in “The Wealthy 100: From Benjamin Franklin to Bill Gates – A Ranking of the Richest Americans, Past and Present

His bequests founded a number institutions bearing his name, the best-known of which are, of course, Johns Hopkins Hospital and Johns Hopkins University.

Although Hopkins is widely-noted as an abolitionist, recent research indicates that Johns Hopkins was a slave owner for at least part of his life.

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Written by (Roughly) Daily

May 19, 2021 at 1:01 am

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