Two magazine covers stood out in poignant contrast on newsstands last week. Forbes magazine released its 29th annual listing of the
world's billionaires. Time Magazine's cover story wondered "How to End Poverty."
It was a good year for the global billionaires' club. Their ranks grew to 691, up 17 percent from the previous year. Collectively,
the wealth of the world's billionaires reached $2.2 trillion, up more than 57 percent over the last two years.
Poverty is growing as well. Time reports that nearly half of the world's 6 billion residents are poor. Over one billion of them
subsist on less than $1 a day. In the United States, according to the US Census Bureau, the number of impoverished Americans rose
3.7 percent in 2003. The number of children living in poverty rose 6.6 percent.
Forbes seeks to explain the billionaires' success by noting that a majority of those on the list are "self-made." Forbes' website
features an interactive quiz that asks, "Do you have what it takes to become a billionaire?" and proceeds to explore things like
marital status and hobbies. The idea is that many billionaires made it on their own.
But to suggest that membership in the growing billionaires' club requires only a combination of hard work and character traits
ignores some dramatic shifts in global economic rules that explain the cavernous divide that has developed between the very rich and
the very poor.
Tax rates have fallen on upper income citizens and corporations worldwide. Fifty years ago in the United States, the highest
marginal income tax rate was 91 percent; today it is 34 percent. As recently as 1979, taxes on capital gains from the sale of
stock, real estate and businesses were 35 percent; today they are 15 percent. Corporate taxes as a percentage of the US economy
have shrunk from 4.1 percent of Gross Domestic Product in 1965 to just 1.5 percent in 2002. While corporate taxes have declined
throughout the world, they have plummeted in the United States, leaving only Iceland among industrialized countries with a lower
corporate tax burden.
Several of the wealthiest billionaires capitalized on public assets and made their fortunes by buying formerly public assets. This
was the case with Mexican Carlos Slim Helu, the world's fourth richest man, who used inherited wealth to buy a substantial share of
Mexico's privatized national telephone company. US billionaires Bill Gates, Paul Allen and Steve Ballmer of Microsoft, and Larry
Ellison of Oracle would not be in Forbes' top 20 billionaires had the US government not invested tens of billions of public dollars
developing computers and the Internet.
Some billionaires' fortunes rest upon paying their employees poverty wages. Such is the case for the Walton family (numbers 10
through 14 on the Forbes
list.) Wal-Mart is the largest private employer in the world. Many of its US workers are so poorly paid that they must rely on food
stamps and other forms of public assistance to get by. Such forms of government aid represent an indirect government subsidy to
corporations whose business model does not include paying employees enough to live on. Worldwide, billions are gained by
outsourcing service, production and manufacturing functions to workers who labor in sweatshop conditions in countries like China.
The role of government policy in determining who has wealth and who does not continues to expand. During the recent debate on the
bankruptcy bill, federal lawmakers refused to close the "asset protection trust" loophole increasingly used by millionaires and
billionaires to shelter mansions and other assets from creditors in bankruptcy. Those same lawmakers weakened protections that
protect the family homes of ordinary people from creditors during bankruptcy.
Forbes is wrong; none of the billionaires did it alone. The chasm between rich and poor is not a divide between who has
intelligence and drive and who does not. Rather it results from a society whose rules allow some to amass wealth greater than could
be enjoyed in a thousand lifetimes, while they deny others enough money to scrape through just one lifetime.
Scott Klinger is the co-director of the Responsible Wealth project at United for a Fair Economy and co-author of 'Executive Excess
2004: Campaign Contributions, Outsourcing, Unexpensed Stock Options and Rising CEO Pay.'