The Pitchforks are Coming…– A Dire Warning from a Member of the 0.01%

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

From Nick Hanauer’s excellent Politico Op-Ed: The Pitchforks are Coming…For Us Plutocrats

Over the past several years, I have been extremely critical of the 0.01% as a socio-economic class, often referring to them as criminal oligarchs. This has nothing to do with the incredible sums of money they have amassed. I’m simply not interested in chasing that kind of wealth, nor am I an envious person. I don’t care how much money anyone has. What I do care about is the kind of power that such money can buy, and how that power is then abused to purchase politicians and run roughshod over entire societies. I have also been disgusted with the fact that the 0.01% as a class seem self-absorbed, apathetic and delusional when it comes to the catastrophe the current economic and financial system is reaping upon the planet. So busy are they patting themselves on the back and scrambling to acquire that next billion to see what is rapidly unfolding beyond their moats.

Fortunately, Nick Hanauer isn’t one of them. In his recent Politico Op-Ed, he pulls no punches in warning of the complete lack of self-awareness inherent amongst his fellow 0.01%ers. While I think his solutions seem overly simplistic and merely address a small symptom of the overall problem, rather than tackling this as the systemic problem it is, I have a tremendous amount of respect for him for writing this. Not only is he extremely self-aware, humble and clearly concerned about The Republic, he calls out his fellow oligarchs for not being so. He is in many ways the exact opposite of the societally destructive Sam Zell, who I called out strongly earlier in the year in my post: An Open Letter to Sam Zell: Why Your Statements are Delusional and Dangerous.

What follows are some of his most poignant statements, as well as my commentary. From Politico:

You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries—from itsy-bitsy ones like the night club I started in my 20s to giant ones like, for which I was the first non-family investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. I tell you all this to demonstrate that in many ways I’m no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can’t even imagine. Multiple homes, my own plane, etc., etc. You know what I’m talking about.

But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

I see pitchforks.

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

Recall my post: Where Does the Real Problem Reside? Two Charts Showing the 0.01% vs. the 1%

But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Here’s what I say to you: You’re living in a dream world. What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time. Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there’s no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand. That’s the way it always happens. If inequality keeps rising as it has been, eventually it will happen. We will not be able to predict when, and it will be terrible—for everybody. But especially for us.

Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.

Because here’s an odd thing. During the past three decades, compensation for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker pay ratio has increased 1,000 percent, and that is not a typo. CEOs used to earn 30 times the median wage; now they rake in 500 times. Yet no company I know of has eliminated its senior managers, or outsourced them to China or automated their jobs. Instead, we now have more CEOs and senior executives than ever before. So, too, for financial services workers and technology workers. These folks earn multiples of the median wage, yet we somehow have more and more of them.

Most of you probably think that the $15 minimum wage in Seattle is an insane departure from rational policy that puts our economy at great risk. But in Seattle, our current minimum wage of $9.32 is already nearly 30 percent higher than the federal minimum wage. And has it ruined our economy yet? Well, trickle-downers, look at the data here: The two cities in the nation with the highest rate of job growth by small businesses are San Francisco and Seattle. Guess which cities have the highest minimum wage? San Francisco and Seattle. The fastest-growing big city in America? Seattle. Fifteen dollars isn’t a risky untried policy for us. It’s doubling down on the strategy that’s already allowing our city to kick your city’s ass.

It makes perfect sense if you think about it: If a worker earns $7.25 an hour, which is now the national minimum wage, what proportion of that person’s income do you think ends up in the cash registers of local small businesses? Hardly any. That person is paying rent, ideally going out to get subsistence groceries at Safeway, and, if really lucky, has a bus pass. But she’s not going out to eat at restaurants. Not browsing for new clothes. Not buying flowers on Mother’s Day.

The whole minimum wage debate is, in my opinion, overly simplified by both sides. On the one hand, if the people of Seattle overwhelming want a minimum wage of $15 per hour so be it. I am a huge proponent of decentralization, and government moving more toward city-states, or even more local and away from Washington D.C. That said, I think the concept of a federal minimum wage to be somewhat idiotic. Cities can and should be able to decide for themselves. If it works, other cities will follow suit or die. Not to mention that an appropriate minimum wage in Seattle is quite different from an appropriate minimum wage in Little Rock, Arkansas. I get where Mr. Hanauer is going with this, but we need to be careful not to overly simplify a complex issue. We don’t need the corrupt morons in Washington D.C. to mandate wages for an enormously diverse nation like these United States.

Wal-Mart is our nation’s largest employer with some 1.4 million employees in the United States and more than $25 billion in pre-tax profit. So why are Wal-Mart employees the largest group of Medicaid recipients in many states? Wal-Mart could, say, pay each of its 1 million lowest-paid workers an extra $10,000 per year, raise them all out of poverty and enable them to, of all things, afford to shop at Wal-Mart. Not only would this also save us all the expense of the food stamps, Medicaid and rent assistance that they currently require, but Wal-Mart would still earn more than $15 billion pre-tax per year. Wal-Mart won’t (and shouldn’t) volunteer to pay its workers more than their competitors. In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages—not just ask politely.

On this point, I completely agree with him. As I have maintained on many occasions, foods stamps are corporate welfare. So from the perspective of who should be subsidizing the survival of Wal-Mart employees, the taxpayer, or Wal-Mart shareholders? The answer is clear: Wal-Mart shareholders. This is not what is happening today. See my post: Walmart Admits in its Annual Report that its Profits Depend Heavily on Corporate Welfare.

We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It’s simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don’t buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my “manager pants.” I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn’t do the country much good.

So forget all that rhetoric about how America is great because of people like you and me and Steve Jobs. You know the truth even if you won’t admit it: If any of us had been born in Somalia or the Congo, all we’d be is some guy standing barefoot next to a dirt road selling fruit. It’s not that Somalia and Congo don’t have good entrepreneurs. It’s just that the best ones are selling their wares off crates by the side of the road because that’s all their customers can afford.

Republicans and Democrats in Congress can’t shrink government with wishful thinking. The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.

One thing we can agree on—I’m sure of this—is that the change isn’t going to start in Washington. Thinking is stale, arguments even more so. On both sides.

My bigger point is do we need Washington D.C. at all? Look at what Seattle has done. Once we start realizing we don’t need the feds, then we can really make progress. At the local level. Local solutions for local problems.

But the way I see it, that’s all right. Most major social movements have seen their earliest victories at the state and municipal levels. The fight over the eight-hour workday, which ended in Washington, D.C., in 1938, began in places like Illinois and Massachusetts in the late 1800s. The movement for social security began in California in the 1930s. Even the Affordable Health Care Act—Obamacare—would have been hard to imagine without Mitt Romney’s model in Massachusetts to lead the way.Obamacare: A great example of how taking something at the local level and then creating a shit-show at the federal level by attempting an idiotic one size fits all approach.

Dear 1%ers, many of our fellow citizens are starting to believe that capitalism itself is the problem. I disagree, and I’m sure you do too. Capitalism, when well managed, is the greatest social technology ever invented to create prosperity in human societies. But capitalism left unchecked tends toward concentration and collapse. It can be managed either to benefit the few in the near term or the many in the long term. The work of democracies is to bend it to the latter. That is why investments in the middle class work. And tax breaks for rich people like us don’t. Balancing the power of workers and billionaires by raising the minimum wage isn’t bad for capitalism. It’s an indispensable tool smart capitalists use to make capitalism stable and sustainable. And no one has a bigger stake in that than zillionaires like us.

The oldest and most important conflict in human societies is the battle over the concentration of wealth and power. The folks like us at the top have always told those at the bottom that our respective positions are righteous and good for all. Historically, we called that divine right. Today we have trickle-down economics.

What nonsense this is. Am I really such a superior person? Do I belong at the center of the moral as well as economic universe? Do you?

My family, the Hanauers, started in Germany selling feathers and pillows. They got chased out of Germany by Hitler and ended up in Seattle owning another pillow company. Three generations later, I benefited from that. Then I got as lucky as a person could possibly get in the Internet age by having a buddy in Seattle named Bezos. I look at the average Joe on the street, and I say, “There but for the grace of Jeff go I.” Even the best of us, in the worst of circumstances, are barefoot, standing by a dirt road, selling fruit. We should never forget that, or forget that the United States of America and its middle class made us, rather than the other way around.

Or we could sit back, do nothing, enjoy our yachts. And wait for the pitchforks.

Mr. Hanaeur, I salute you. While I think the problem is considerably more systemic than you seem to think, I’m impressed you have the self-awareness and humility to write this. If there were more people like you in the 0.01%, we wouldn’t be in the state we are in.

Full article here.

In Liberty,
Michael Krieger

[dfads params=’groups=5364&limit=1&ad_html=p&return_javascript=1′]

Like this post?
Donate bitcoins: 35DBUbbAQHTqbDaAc5mAaN6BqwA2AxuE7G

Follow me on Twitter.

17 thoughts on “The Pitchforks are Coming…– A Dire Warning from a Member of the 0.01%”

  1. Why is this so complicated ? Free markets system : Winner takes all, Loser loses all. The first part is happening very nicely. But the second part is not. It is essentially the fear of losing all which drives people to make the right decisions. Ideally all banks that went bust, should have gone bust and not bailed out. Yes, home prices will fall, markets will crash, joblessness will be high for a few painful years. But this will create a foundation or platform for a better generation in future and most leaders would be careful not to repeat the folly.

    • “Free market” economies do not result in “winner take all”. Free marketeers create businesses that employ people: a win-win situation. In the USA most of the great wealth (in Silicon Valley. for example) is the direct result of IPO’s.

  2. In the USA, the narrative of “income inequality” has required the invasion of tens of millions of impoverished Proles from the South to maintain it. Without this invasion of America, the economy might actually begin to turn around…and the middle class would no longer be threatened by the DEMS economic madness.

  3. Jim Morrison once said, “They got the guns, but we got the numbers…” – yeah, and now they have guillotines, FEMA camps, armored vehicles, H&K (German) machine guns, drones, and they control the Internet and what most think – while we who feel we have an idea of what is going on are largely divided, individualistic and probably represent no more than a third of the electorate in total, but in my country maybe 1% have any idea what is going on as Germerica quietly gobbles up all our resources and that good ‘ol boy Uncle Samhain provides us with “natural” disasters to cover their obscene plundering of our resources as we are being turned into the Haiti of the South Pacific.

    The problem is not the oligarchs, peak oil, lack of resources. The great American economy was fundamentally a fraud built upon a foundation of plunder and privilege, and what is now evolving is simply the organic and inevitable out growth of your “growth” – a growth which is now considerably and increasingly carcinogenic. It is an illusion, an ill-u-sion to go with you man-sions. It is the same reason why you lead the world in cancer and heart disease…hello…its a manifest metaphor folks…your country is seriously sick…and to “blame” the oligarchs and bankers is like a John blaming a whore for doing what she does best, put out for pay.

    The reason why the world is increasingly bound up in debt is the manifestation of a spiritual principle, in that if you do not forgive, then neither shall you be forgiven, and that greed for gain is the root of every evil. The Communists and Fascist will fight another war – that is for sure, it is too well planned and the social engineering is already well established, while cellular tech and EMF turns the world into a giant microwave and Americans spend more than would feed the third world on diets and treating obesity, and there are more than twice as many fat-asses in the world than there are starving.

    Trying to fix the system is like trying to patch an old garment, or dung a fruitless fig, and until God takes all the toys and comforts away, the children will want to play. That is why the wealth is being concentrated in fewer and fewer hands – it is much easier to have these guys do all the acquiring and agglomerating of wealth, it’s less hands to take it from.

    The retiring Governor of the Bank of England confided in 1999 that within 12-15yrs the world would have a single unit digital currency model. Te collapse of the USD is scheduled to be complete by September 2015.

  4. There is more than decentralization. It’s about dehumanizing and controlling the employees.

    I’m a computer scientist – degrees in engineering and comp sci. Had a very successful career. However, at 55, I was ‘thrown away’.

    Nothing is more dehumanizing than applying for a job on line. Where you might spend 30 minutes, slogging through a web site – just to have it crash when you press ‘submit’. For the sites where you are successful – there’s never a response. Try doing this for 6 months.

    No longer is it good enough to have education, experience, good track record, proven ability, and stellar references.

    You need to be the ‘exact’ person. The one who knows ABC, XYZ, and PQR. Employer’s would rather steal the exact person from another company, than give an educated person a little time (like a couple of months) to ‘come up to speed’.

    Employers have changed work into something like the guilds in medieval Europe – no flexibility – you are in a slot.

    I’m glad I’m older, cause I don’t see this getting any better.

    • And then there’s the increased reliance on contract labor. Bring the person in short term, no benefits, let them go, bring the next person in. Some get hired on, most don’t.

  5. Support small businesses, small companies, small banks and credit unions and small bed and breakfasts instead of hotel chains.

  6. I’m the last person in the world that would ever advance a preference for communism or a heavy socialistic state. Once upon a time, America recognized unbridled capitalism as undesirable and structured its taxes to discourage it, as well as creating the Sherman Antitrust Act to place limits on corporate growth. There used to be a “rule of thumb” in the business world that the highest paid in a company was worth no more than 20 times the least. Now the differential can be as high as several thousand. Many of today’s retirees, even having been quite skilled and dedicated in their working lives, didn’t make over a million in 40-50 year long careers. Just how much money and power can a person lust after, to acquire? If I suddenly won a huge lottery, I’d have no desire for anything resembling a lifestyle of conspicuous consumption, and I doubt seriously you’d have a clue that I had acquired such wealth before I gave away or donated most of it to others and other causes. Contemplate the idea of “wretched excess” and you’ll have a good idea what I think of million and multimillion dollar homes and openly lavish lifestyles!

  7. True. As my granny used to say – even the richest person cannot wear two shirts at the same time. So zillionaire – stop basking in your false trickle down glory and face it. You have built your zillions on the shoulders of thousands of underpaid labour or extracted it from the post-2008 cheap money spigot if you are close enough to get a 0% loan. The benefit you brought to society is simply not worth it – while pocketing your gargantuan dividends you leave the poor and middle income employees to subsidise underpaid workers you hire at a rock bottom price. After you consumed your luxury home, holidays, yachts what else do you need to consume to make you forget this iniquity? Or will you just think you really are that clever and you really do deserve to make 1000 times as much as a hard working janitor who performs important and society benefitting work of keeping our schools clean? I would argue such guy produces more value to society than some high frequency trading finance guru or a corrupt banker pocketing bonus while the taxpayer shoulders the loss via bailouts.

  8. It will take much more than a $15 minimum wage to get Washington off the backs of the cities and states of this nation. Americans have, by suckling on the teat of the US Treasury placed themselves and their once independent States under the exclusive jurisdiction of Washington and Congress.
    Therefore, those who can and do buy and sell politicians can and do control the destiny of all Americans via that control.
    When any citizen of any State admits to being the citizen of the US States (Washington DC) they place themselves under the exclusive jurisdiction of the US Congress and are therefore slaves to the .001 percent that owns that Congress, including 96% of all media, their private federal reserve system, therefore the creation of all money via usury, and much, much more.
    This cabal is in control and it will take much more to dislodge them.
    They are in control via control of this nations money and that is exactly the way it was planned from the very beginning starting with the war of northern aggression against the South.
    The American middle class is history.
    In any case a college graduate with some worthless degree working in Seattle waiting tables at $15 an hour may be able to pay off their student loan to the 1% bankers.


Leave a Reply