And the rich get richer


Thursday, July 3
According to Merrill Lynch & Co. and the Capgemini Group, a consulting firm, the number of people in the world who have more than $1 million in assets passed the 10 million mark last year.

The combined wealth of the world's millionaires stood at $41 trillion as of 2007, a 9 percent increase over the previous year. That makes their average wealth more than $4 million, the highest its ever been.

One in three millionaires lives in the United States, but Europe and the Pacific Rim aren't far behind. While 600,000 people joined the millionaires club in 2007, it is still an exclusive group that represents just one-fifth of 1 percent of the world's population.

And then there's the superrich -- defined as those with more than $30 million in assets. There were 103,000 of them last year, an increase of 9 percent over the previous year. Their wealth grew by nearly 15 percent in that time.

These figures came to mind when we read an interview with former Texas Republican Sen. Phil Gramm that appeared in Saturday's Wall Street Journal.

Gramm, the architect of most of the financial policies that have brought the U.S. economy to the brink of collapse, is now working as an investment banker and consultant for the Swiss bank UBS. Gramm also has another side job, economic advisor for Sen. John McCain's presidential campaign.

Gramm told the Journal that in his view, corporate CEOs are underpaid.

"In economics, we define labor exploitation as paying people less than their marginal value product," Gramm, a former economics professor, said. "I recently told Ed Whitacre (former CEO of AT&T, who retired with a $158 million pay package) he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the Bell companies, and he turned it into the most dominant phone company on Earth. His severance package should have been billions."

Roll that paragraph over in your mind while you're trying to figure out how to pay the fuel bill this winter. Then consider this. As senator, Gramm opposed increasing the minimum wage. He opposed virtually every piece of legislation that benefited workers, while supporting massive tax cuts for the wealthy and corporations. This is a man who believes CEOs are underpaid, who thinks that having the bosses making, on average, 400 times what their workers earn, is defensible. This is the guy who has John McCain's ear on economic issues.

To review, Gramm was the driving force behind legislation in 1999 that repealed the Glass-Steagall Act of 1933. This ended the separation of commercial banks, which handle consumer activities such as checking and savings accounts, and investment banks, which handle speculative trading and mergers.

Repealing Glass-Steagall set off a wave of megamergers in the banking, insurance and securities industries. These sowed the seeds for the subprime lending debacle that has led to hundreds of billions of dollars of losses worldwide.

Gramm was also the driving force in December 2000 behind what's now known as "the Enron loophole," the Commodities Futures Modernization Act. This bill deregulated derivatives trading and exempted energy trading from regulatory oversight. This allowed Enron to make billions gaming the California electric market before that company's collapse, and today allows energy traders to drive up the price of crude oil at will.

Gramm's reward for his work in the deregulating the banks and the securities markets was the cushy job he now holds at UBS -- a bank that has written off more than $37 billion due to its losses in the subprime meltdown. The UBS gig comes on top of the millions of dollars in campaign contributions Gramm received during his 24 years in Congress from the financial services industry.

The rich get richer. The poor get poorer. And snake oil salesmen like Phil Gramm get to advise presidential candidates on economic matters. Next time you hear John McCain talking about the economy, remember where he's getting his talking points from.


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