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How do the mega rich harm the country?
Do their investments help the economy grow and provide more jobs?
To the contrary, a lot of their investments actually slow job growth. Quickly buying and selling billion dollar companies, for example, can instantly make fat profits, but it frequently leads to big layoffs and even to eventual bankruptcy as the new owners run the company only to extract instant profits. The huge size of their fortunes gives them opportunities not even available to the suburban millionaires to make gigantic big profits. Bessemer, an investment company reserved for the mega rich, claims a 6,000% return on investment over a decade by using investment opportunities available to only the mega rich.
So they don’t create the jobs we need?
No. Their fortunes have doubled and even tripled in the 1990s, but over the last 15 years they have far too often not invested in job creation. Since they control close to 40% of all investment, it’s a major reason why this economy hasn’t even provided enough jobs for new entrants into the labor force.
That’s important to remember when you realize that the official unemployment rate you hear about – nearly 6% – doesn’t include those who are too discouraged to look any more or the part-timers who need full-time jobs. If you compete these along with some other factors, the figure is about 14%. That figure comes from MIT economist Lester Thurow.
Which of their investments get the highest payback?
Their most profitable “investment” is buying up congressmen. The minimum price now is about $100,000. According to Kevin Phillips, the mega rich can earn as much as $30,000 for each dollar they invest in politicians.
There is a special group of 400 mega rich who are mostly in charge of this type of investment. New York Times tax journalist David Johnson calls them the political donor class because they do most of the buying. The $100,000 minimum price is pocket change for them because they make $175 million in a year. That would work out to $80,000 an hour if they worked a normal work week. (Actually, it’s much more. Johnson writes that the $175 million they declare on their tax forms is just the tip of the iceberg.)
This market in politicians has greatly heated up in the 1990s. An average of 125 people, or “lobbyists” for each congressman helps the political donor class to make these investments. Compare that to the 1960s when there were only 30 lobbyists per congressperson. Lobbying companies are now the largest private employers in our capital.
This is, of course, a market description of the campaign contribution fraud. We put it in market terms to provide an example that shows that the mega rich are far too often uniquely positioned to make their fat profits at our expense.