(Mr. Ben Mah, author of America and China, America and the World, and America in the Age of Neoliberalism, is a frequent contributor to this website.)
Chelsea Clinton, the only daughter of Bill and Hillary Clinton wed investment banker Marc Mezvinsky on July 31, 2010. The wedding was held at a 50-acre exclusive estate in upstate New York, and was reported to cost $5 million, $3 million for Clinton and $2 million for the U.S. taxpayers as Secret Service was needed to protect the former U.S. president and other visiting foreign dignitaries.1.
Clinton’s spending broke the record for a celebrity wedding, the cost of which included an $11,000 wedding cake and $250,000 for floral arrangements. One wonders how Bill Clinton, who came to Washington as a poor politician from Arkansas, could amass such a fortune since leaving office only a short while ago. Some also point out it is inappropriate for high profile politicians such Hillary and Bill to engage in conspicuous consumption at a time of economic crisis when millions of Americans are denied basic health care and going to bed hungry.
Indeed, conspicuous consumption in America first reared its ugly head during the Gilded Age—the period between 1870—to 1900. The term conspicuous consumption was coined by economist Thorstein Veblen in 1899 to describe the behavior of the Nouveau Riche, a new class that emerged in the United States in the later part of 19th century. Money was used to buy status in society, as during this period, “bath tubs were cut from solid marble; artificial waterfalls were installed in dining rooms for entertaining, garden trees were decorated with artificial fruit made of fourteen carat gold.”2. This was the old Gilded Age, when Robber Barons used unfair business practices to dominate the respective industry thereby amassing an enormous personal fortune. In the early 20th century, business titans such as John D. Rockefeller, J.P. Morgan and Andrew Carnegie ruthlessly cut costs, exploited workers and “place the accumulation of wealth above all else.”3. As a result, they were vilified and regarded as a destructive force, contrary “to the ideals upon which the United States was founded.”3.
Similarly, the 21st century ushered in a new Gilded Age, in which greedy CEOs and fund managers have replaced the titans of the industrial past. Consequently, the income disparity of good old days of Robber Barons reappeared once again. John D. Rockefeller, the richest man in 1894, reported an income of $1.25 million or 7,000 times the average income at that time. But James Simons, a hedge fund manager, has an income of $1.7 billion or 38,000 times the average income in 2006. Altogether, the top 25 hedge fund managers raked in more than $14 billion for that year.4.
While not as spectacularly compensated as the hedge fund managers, corporate titans or CEOs like Jack Welch of GE were doing quite well too. When Welch retired, he was given perks worth at least $2 million a year for life. These perks include the use of a Manhattan apartment with a supply of food and wine, access to corporate jets and other benefits. This was in addition to his salary and stock options worth $123 million for the year he retired.5.
The amount of Welch’s take home pay might be shocking to the average worker, but it is not so unusual in the corporate world, as over the past years, CEOs’ salaries have increased from 39 times to more than 1,000 times the pay of an average worker in America.5.
In the financial service sector, Mr. Sandy Weill, the former CEO of Citicorp is another titan in this new Gilded Age. By 2006, the year he retired as the Chairman of Citicorp, Mr. Weill’s net worth was said to be $1 billion, not counting the $500 million he already donated to philanthropy. This was remarkable for a boy from a Polish immigrant family, who grew up in Brooklyn, and was a mediocre college student. After graduating from Cornell, Mr. Weill landed a low level Wall Street job in the 50s, first as a runner, then a stock broker. Over the years, with a reputation as a risk-taking deal maker, Mr. Weill, through merging and acquisition, was able to build a financial empire known as Citigroup in 1998, a year before the repeal of the Glass-Steagall Act. “Mr. Weill’s vision was to create a financial institution in the style of those that flourished in the last Gilded Age,” according to the New York Times.6.
Citigroup was formed as a result of the merger between Citicorp—the parent of Citibank and Travelers Groups. Although the Glass-Steagall Act prohibited the merger of a commercial bank with an insurance company, Mr. Weill overcame this regulatory hurdle by promising to divest assets between two and five years. The company assumed this undertaking with full confidence that the financial deregulation legislation would be passed, making the divestiture unnecessary.
As expected, under heavy lobbying influence, President Clinton did the financial service industry a big favor by revoking the Glass-Steagall Act in 1999. The president “did so partly to accommodate the newly formed Citigroup, whose heft was necessary,” 6. according to Mr. Weill. Mr. Weill can be persuasive as he also argued that U.S. financial capital cannot be a big player in China or India without giants like Citigroup. “Not having American financial institutions that really are at the fulcrum of how these countries are converting to a free-enterprise system would really be a shame,” said Mr. Weill.6.
Unfortunately for Mr. Weill, things have not turned out that way, as in China Citigroup had to suspend two executives for lying to the regulators and to the company. Moreover, after a series of scandals involving WorldCom, Enron with an $8 billion settlement, Citigroup’s reputation has been considerably tarnished. The company has been accused of predatory lending, conflict of interest and financial manipulation at home and abroad.7.
Not surprisingly, with the culture to grow at any cost, Citigroup suffered a huge loss during the 2008 financial crisis. Citigroup was bailed out by the U.S. government with a $20 billion investment and $306 billion in loan guarantee. Citigroup was lucky, as it belongs to a group of financial institutions known as “too big to fail’ and it was rescued at the expense of the U.S. taxpayers.
Unlike Mr. Weill who was rewarded to the tune of billions for reckless business behavior, Mr. Clinton made hundreds of millions from speaking tours and is engaged in business ventures in China in collaboration with a billionaire. This is not a surprise, as Mr. Clinton has built up so much goodwill in the business community.12.
Little more than two weeks after the extravagant Clinton wedding, a 29-year-old Shaquan Duley from South Carolina killed her two children by strapping them to the car and driving it into the river. She told the police that she was unemployed and having money problem. She did this after a quarrel with her mother.
The Sheriff, after a lengthy interview with the young mother declared: “This was a young lady that was in trouble, in trouble in more ways than she realized. She was in trouble and she didn’t know where to turn.”8.
Similarly, many people in the U.S. industrial heartland are also in trouble and do not know where to turn either. According to Paul Craig Robert, the former Assistant Treasury Secretary: “While Chelsea’s wedding guests eat an $11,000 wedding cake and admire $250,000 floral displays, Lisa Roberts in Ohio is struggling to raise contributions for her food pantry in order to feed 3,000 local people, whose financial independence was destroyed by investment bankers, job offshoring, and unaffordable wars. The Americans dependent on Lisa Roberts’ food pantry are living out of vans and cars. Those with a house roof still over their heads are packed in as many as 14 per household according to the Chillicothe Gazette in Ohio.’’ With so many demands, Lisa Roberts’ food pantry has “had to cut back to half rations per person in order to have something for everyone who needed it.”1. According to the Guardian, 50 million Americans were not able ‘‘to buy sufficient food to stay healthy in 2008,’’ and one million children go to bed hungry in America.1.
Indeed, the Great Recession of 2008 has hit the 20 million unemployed Americans very hard, and they are the ones who occupy the bottom of the income distribution during the new Gilded Age. As a matter of fact, the pattern of income distribution in America has returned to the good old days of the Robber Barons when the top 10 percent of the families owned 85 percent of the stock and only 15 percent was distributed among the rest. Today the bottom of 80 percent of American hold only 7 percent of the financial assets, while the bottom 40 percent only hold 1 percent of the nation’s wealth. As a result, personal bankruptcy and foreclosures continue unabated and have hit all-time highs. According to one survey, ‘‘55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the recession began.’’ 61 percent of Americans usually live from paycheck to paycheck.9.13.
With so many people in such dire straits, it is puzzling that many poor Americans seem meekly to accept their fate. Unlike the age of the Robber Barons, when the resentment against those who exploited them was so deep and wide, that it led to the development of a progressive movement and the enactment of anti-trust legislations to stop monoplistic business practices. One explanation offered for this was the legacies of the New Deal and the Great Society, in which social insurance programs such as Medicaid, Medicare and Social Security have blunted the impact of poverty in the new Gilded Age and provided a social safety net.5.
Others point out the lack of militancy and the absence of a rebellious mood in American society are due to the decline of the unions in America, especially since the passing of the Taft-Hartley Act a little more than 60 years ago. Taft-Hartley Act specifically ‘‘impeded employees’ right to join together in labor unions; undermined the power of unions to represent workers’ interests effectively; and authorized an array of anti-union activities by employers,’’ according to Ralph Nadar, political activist and four-time U.S. presidential candidate.
Obviously, the economic problems of America’s workers are a reflection of political realities. It is through the process of money politics that legislation is passed in favour of the rich and powerful. The rich and the powerful then ‘‘plowed even more money back into politics to secure and extend that favoritism—and they are still reaping the benefits.’’ according the Kevin Phillip, the author of "Wealth and Democracy : A Political History of the American Rich’’.11.
Sadly, this is democracy in action in America!
Notes :
1. Robert, Paul Craig : ‘Let Them Eat Cake’, July 31, 2010 Global Research
2. Page, Christine : ‘A History of Conspicuous Consumption’, acrwebsite.org
3. U.S. History Encyclopedia : ‘Robber Baron’ Answer.com
4. Naked Capitalism : ‘Krugman on the New Gilded Age’ April 27, 2007
5. Krugman, Paul : ‘ For Richer’, October 20, 2002 New York Times
6. Uchitelle, Louis : ‘The Richest of the Rich, Proud of a New Gilded Age’, July 15, 2007 New York Times
7. Loomis, Carol : ‘Tough Questions for Citigroup’s CEO’, November 29, 2004 Fortune
8. AP : ‘South Carolina Police : ‘Mom killed children before sinking car’, August 17, 2010
9. Global Research : ‘No Recovery in Sight : 40 statistic which conform the collapse of the U.S. economy’, July 20, 2010
10. Nadar, Ralph : ‘Roll Back the New Gilded Age : Repeal the Taft-Hartley Act’, September 5, 2007 Alternet.org
11. Phillips, Kelwin : ‘How wealth defines power : the politics of the new Gilded Age’, May 1, 2003 The American Prospect
12. McIntire, Mike : « Clintons made $109 million in last 8 years », April 5, 2008 New York Times
13. Woeff, Edward : ‘The Wealth Divide. The Growing Gap in the United States Between the Rich and the Rest’, May 2003 The Multinational Monitor
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