The Super Rich


 

The super rich, the 1 percent that owns the lion’s share of the nation’s
wealth, go uncounted in most income distribution reports. Even those who purport to study
the question regularly overlook the very wealthiest among us. For instance, the Center on
Budget and Policy Priorities, relying on the latest U.S. Census Bureau data, released a
report in December 1997 showing that in the last two decades "incomes of the richest
fifth increased by 30 percent or nearly $27,000 after adjusting for inflation." The
average income of the top 20 percent was $117,500, or 13 times larger than the $9,250
average income of the poorest 20 percent.

But where are the super rich? An average of $117,500 is an upper-middle income, not at
all representative of a rich cohort, let alone a super rich one. All such reports about
income distribution are based on U.S. Census Bureau surveys that regularly leave Big Money
out of the picture. A few phone calls to the Census Bureau in Washington, DC revealed that
for years the bureau never interviewed anyone who had an income higher than $300,000. Or
if interviewed, they were never recorded as above the "reportable upper limit"
of $300,000, the top figure allowed by the bureau’s computer program. In 1994, the
bureau lifted the upper limit to $1 million. This still excludes the richest one percent,
the hundreds of billionaires and thousands of multimillionaires who make many times more
than $1 million a year. The super rich have been computerized out of the picture.

When asked why this procedure was used, an official said that the Census Bureau’s
computers could not handle higher amounts. A most improbable excuse, since once the bureau
decided to raise the upper limit from $300,000 to $1 million it did so without any
difficulty, and it could do so again. Another reason the official gave was
"confidentiality." Given place coordinates, someone with a very high income
might be identified. Furthermore, he said, high-income respondents usually understate
their investment returns by about 40 to 50 percent. Finally, the official argued that
since the super rich are so few, they are not likely to show up in a national sample.

But by designating the (decapitated) top 20 percent of the entire nation as the
"richest" quintile, the Census Bureau is including millions of people who make
as little as $70,000. If you make over $100,000, you are in the top 4 percent. Now
$100,000 is a tidy sum indeed, but it’s not super rich—as in Mellon, Morgan, or
Murdock. The difference between Michael Eisner, the Disney CEO who pocketed over $300
million in one year, and the individual who makes $9,250 is not 13 to 1—the reported
spread between highest and lowest quintiles—but over 32,000 to 1.

Speaking of CEOs, much attention has been given to the top corporate managers who rake
in tens of millions of dollars annually in salaries and perks. But little is said about
the tens of billions that these same corporations distribute to the affluent investor
class each year, again that invisible 1 percent of the population. Media publicity that
focuses exclusively on a handful of greedy top executives conveniently avoids any exposure
of the super rich as a class. In fact, reining in the CEOs who cut into the corporate take
would well serve the big shareholder’s interests.

Two studies that do their best to muddy our understanding of wealth, conducted
respectively by the Rand Corporation and the Brookings Institution and widely reported in
the major media, found that individuals typically become rich not from inheritance but by
maintaining their health and working hard. Most of their savings comes from their earnings
and has nothing to do with inherited family wealth, the researchers would have us believe.

In typical social-science fashion, they prefigured their findings by limiting the scope
of their data. Both studies failed to note that achieving a high income is in large part
due to inherited advantages. Those coming from upper-strata households have a far better
opportunity to maintain their health and develop their performance, attend superior
schools, and achieve the advanced professional training, contacts, and influence needed to
land the higher paying positions.

More importantly, both the Rand and Brookings studies fail to include the super rich,
those who sit on immense and largely inherited fortunes. Instead, the investigators
concentrate on upper-middle-class professionals and managers, most of whom earn in the
$100,000 to $300,000 range—which indicates that the researchers have no idea how rich
the very rich really are.

When pressed on this point, they explain that there is a shortage of data on the very
rich. Being such a tiny percentage, "they’re an extremely difficult part of the
population to survey," pleads Rand economist James P. Smith, offering the same excuse
given by the Census Bureau officials. That Smith finds the super rich difficult to survey
should not cause us to overlook the fact that their existence refutes his findings about
self-earned wealth. He seems to admit as much when he says, "This [study]
shouldn’t be taken as a statement that the Rockefellers didn’t give to their
kids and the Kennedys didn’t give to their kids" (New York Times, July 7,
1995). Indeed, most of the really big money is inherited—and by a portion of the
population that is so minuscule as to be judged statistically inaccessible.

The higher one goes up the income scale, the greater the rate of capital accumulation.
Economist Paul Krugman notes that not only have the top 20 percent grown more affluent
compared with everyone below, the top 5 percent have grown richer compared with the next
15 percent. The top one percent have become richer compared with the next 4 percent. And
the top 0.25 percent have grown richer than the next 0.75 percent. It has been estimated
that if children’s play blocks represented $1,000 each, over 98 percent of us would
have incomes represented by piles of blocks that went not more than a few yards off the
ground, while the top one percent would stack many times higher than the Eiffel Tower.

Marx’s prediction about the growing gap between rich and poor still haunts the
land—and the entire planet. The growing concentration of wealth creates still more
poverty. As some few get ever richer, more people fall deeper into destitution, finding it
increasingly difficult to emerge from it. The same pattern holds throughout much of the
world. For years now, as the wealth of the few has been growing, the number of poor has
been increasing at a faster rate than the earth’s population. A rising tide sinks
many boats.

To grasp the true extent of wealth and income inequality in the United States, we
should stop treating the "top quintile"—the upper-middle class—as the
richest cohort in the country. But to do that, we need to look beyond the Census
Bureau’s cooked statistics. We need to catch sight of that tiny, stratospheric apex
that owns most of the world.
                       

Michael Parenti’s most recent books are Blackshirts and Reds: Rational Fascism and
the Overthrow of Communism andAmerica Besieged, both published by City Lights Books.