{"id":113479,"date":"2014-04-21T14:02:56","date_gmt":"2014-04-21T14:02:56","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/?p=113479"},"modified":"2014-04-21T14:02:56","modified_gmt":"2014-04-21T14:02:56","slug":"meritocracy-myth-super-rich-really-make-money","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/latest-news\/meritocracy-myth-super-rich-really-make-money\/","title":{"rendered":"The Meritocracy Myth: How the Super-Rich Really Make Their Money"},"content":{"rendered":"

Paul Buchheit<\/strong>
\n RINF Alternative News<\/a><\/strong><\/p>\n

Warren Buffett once\u00a0<\/span>claimed<\/a>\u00a0that the “genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did.”\u00a0<\/span>The Economist<\/a>\u00a0suggested that “people succeed through brains and hard work.” Economist Tyler Cowen believes in a\u00a0<\/span>“hyper-meritocracy”<\/a>\u00a0in which wealth is created by the most intelligent and motivated people.<\/span><\/p>\n

That all sounds very inspirational. But the super-rich tend to make their money in less meritorious ways.<\/p>\n

1. Betting on Food Prices to Rise<\/strong><\/p>\n

Chris Hedges<\/a>\u00a0noted that Goldman Sachs\u2019 commodities index “is the most heavily traded in the world. The company hoards rice, wheat, corn, sugar and livestock and jacks up commodity prices around the globe so that poor families can no longer afford basic staples and literally starve.” Numerous sources\u00a0agree<\/a>\u00a0that speculation drives up commodity prices.\u00a0Wheat<\/a>, for example, rose in price from $105 to $481 in just eight years.<\/p>\n

2. Betting on Mortgages to Fail<\/strong><\/p>\n

In 2007 hedge fund manager John Paulson\u00a0conspired<\/a>\u00a0with Goldman Sachs to create packages of risky subprime mortgages, so that in anticipation of a housing crash he could use other people’s money to bet against his personally designed sure-to-fail financial instruments. His successful bet against American households paid him $3.7 billion.<\/p>\n

Adding to the insult is that much of a hedge fund manager’s income is considered\u00a0carried interest<\/em>, which is taxed at the lower capital gains rate. How do they merit this? They don’t. AsDean Baker<\/a>\u00a0explains, “Carried interest…has no economic rationale. With most other tax breaks there is at least an argument as to how it serves some socially useful purpose.”<\/p>\n

3. Renting Houses Back to People Who Lost Them<\/strong><\/p>\n

Private equity firms like\u00a0Blackstone<\/a>\u00a0are buying up foreclosures and renting them back athigher rates<\/a>\u00a0while waiting for home prices to rise. As absentee landlords they have little interest in long-term community issues.<\/p>\n

They go for even bigger money by packaging the rental agreements into\u00a0rental-backed securities<\/em><\/a>, which are disturbingly similar to the\u00a0mortgage-backed securities<\/em>\u00a0that brought down the economy in 2008.<\/p>\n

4. Being a Banker<\/strong><\/p>\n

Almost all of the big names have participated. HSBC Bank\u00a0laundered money<\/a>\u00a0for Mexican drug cartels.\u00a0Countrywide<\/a>\u00a0and\u00a0Wells Fargo<\/a>\u00a0targeted Blacks and Hispanics for unaffordable subprime loans.\u00a0GE Capital<\/a>\u00a0skimmed billions of dollars from its customers.\u00a0Bank of America<\/a>and\u00a0JP Morgan Chase<\/a>\u00a0hid billions of dollars of bonuses and losses and loans from investors. Banks fixed interest rates in the\u00a0LIBOR scandal<\/a>, and illegally foreclosed on millions of homeowners in the\u00a0robo-signing<\/a>\u00a0scandal.<\/p>\n

5. Making “Can’t Lose” Bets on Wall Street<\/strong><\/p>\n

With\u00a0high-speed<\/a>\u00a0computer trading<\/a>, programs can identify ‘buy’ orders, purchase the stock in a few nanoseconds, and then sell it to the identified buyer for a few pennies more. By doing this millions of times per hour, billions of dollars can be\u00a0extracted<\/a>\u00a0from the stocks that make up our retirement accounts.<\/p>\n

Some evidence of the strategy’s effectiveness comes from the astonishing performance ofVirtu Financial<\/a>, which made money in the stock market on 1,277 out of 1,278 days over a five year period. That is, only one bad day in five years.<\/p>\n

6. Checking the Stock Portfolio Every Morning<\/strong><\/p>\n

In one year the\u00a0Forbes 400<\/a>\u00a0‘earned’ more than the total combined\u00a0budget<\/a>\u00a0for SNAP, WIC (Women, Infants, children), Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, and Housing. These lucky 400 were the main beneficiaries of a\u00a0stock market<\/a>\u00a0that grew by\u00a0$4.7 trillion<\/a>\u00a0in just one year.<\/p>\n

7. Having the Right Friends and Relatives<\/strong><\/p>\n

Like having Fred Koch or Sam Walton as your daddy. The authors of\u00a0The Meritocracy Myth<\/em><\/a>say it well: “In the race to get ahead, the effects of inheritance come first and merit second, not the other way around.” Much of the individual wealth in our country was taken byindividuals<\/a>\u00a0who had the right connections. The CEOs of Silicon Valley, the alleged mecca of self-made tech visionaries, are no different. A\u00a0Reuters analysis<\/a>\u00a0concluded that a prestigious degree and personal connections to power-brokers are “at least as important as a great idea” for Silicon Valley entrepreneurs.<\/p>\n

None of these money-making methods are productive, or praiseworthy, or suggestive of a meritocracy. Perhaps\u00a0demeritocracy<\/em>\u00a0is more apt.<\/p>\n

Paul Buchheit<\/strong> is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of “<\/span>American Wars: Illusions and Realities<\/a>” (Clarity Press). He can be reached at paul@UsAgainstGreed.org.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Paul Buchheit RINF Alternative News Warren Buffett once\u00a0claimed\u00a0that the “genius of the American economy, our emphasis on a meritocracy and a market system and a rule of law has enabled generation after generation to live better than their parents did.”\u00a0The Economist\u00a0suggested that “people succeed through brains and hard work.” Economist Tyler Cowen believes in a\u00a0“hyper-meritocracy”\u00a0in […]<\/p>\n","protected":false},"author":1,"featured_media":113506,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-113479","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-latest-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/113479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=113479"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/113479\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/113506"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=113479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=113479"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=113479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}