99% versus 1%? Or 50% and 40% versus 10%?

Does the phrase ‘the 99% versus the 1%’ make any sense? Firstly, it assumes that there is a clear dividing line of income, or perhaps ownership of wealth, between the bottom 99% and the top 1% in a particular society. Secondly, it assumes there is a difference of political outlook between those who are in the 99% and those who are in the 1%. Thirdly, users of the slogan mostly ignore the fact that there is a clear hierarchy of income and wealth among countries in the world, separate from whatever may be the distribution within a particular country.

Here I will present some information on the first of these issues. The second can be dismissed simply by noting that there is no necessary relationship between a person’s political outlook and their position in a country’s income and wealth tables. A more relevant fact is that masses of people in richer countries can be pro-imperialist, to the point of signing up for a war, even if they are not in the higher echelons of society. The third point has been examined in a number of other articles on this blog.

Statistics for rich countries commonly show that the very richest people have large multiples of everyone else’s income or wealth, so that it does indeed seem as if those at the top, the 1%, are a well-defined separate group. However, a closer look at the figures reveals a different picture.

The examples I will give are focused on the ownership of financial assets in the US and the UK. Not only the ‘rich’, but also millions of others own these assets, perhaps directly, but more commonly via savings plans, endowment policies and pension schemes.

US Census Bureau data for 2007 show the following:

- For US families in the 80-90th percentile of the income distribution, the median holding of equities was $62,000, and for families in the top 10% of the income distribution, the median holding was $219,000.

- By comparison, the median value of equity holdings for families in the 40-60th percentile was less than $18,000; it was less than $9,000 for the 20-40^th percentile.

The families counted were only those owning equities, however half of US households do, directly or indirectly, so the top 20% of these families will account for some 30 million and the top 10% are 15 million people in the US, based on a population of 300 million. These figures exclude other assets, such as bonds, property and pensions, which would substantially raise the sums, especially for the higher income groups.

A variety of UK data sources show the following facts:

- In 2005 there were some nine million people in the UK owning equities either directly or via mutual funds, some 15% of the UK population.

- At the end of 2010, UK individuals directly owned 11.5% of the value of UK equities, of £204.5bn worth, excluding any holdings via investment funds.

- Estimates of the net financial wealth of UK households in 2008-10, including cash savings, bond and equity holdings minus financial liabilities (excluding mortgages), showed a mean figure of £44,200.

- The latter distribution was skewed dramatically, and the median net household wealth was only £6,600, but it is instructive to note the details.

- Nearly a quarter of all households had zero or negative net financial wealth, 55% of households had from zero to £50,000 net financial wealth, 9% had from £50,00 to £100,000 and nearly 12% of households had more than £100,000.

These figures, as in the US case, also ignore the large exposure to equities and bonds that individuals have via pension funds, which in the UK case make up 39% of total household wealth compared to just 11% for financial wealth. Another 39% of household wealth is made up from property holdings, with 68% of households being owner-occupiers.

In conclusion, those who want to use a slogan like the ‘99% versus the 1%’ might consider revising it to ‘the 30% broke and the 50-60% doing all right versus the 10-20% rich’. Admittedly, it is not as catchy, but having to mouth it less often might allow some time to examine the realities of the imperialist world economy today.

Tony Norfield, 17 June 2013

Monopoly

‘If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism.’ Lenin, 1916

Lenin’s definition of imperialism involves the control of the world economy by groups of monopolistic companies, not simply monopolised production in particular countries, and also a hierarchy of nations in the world economy, with the biggest capitalist powers dominating. The role of the state is important because of the inevitably uneven development of world capitalism. More economically developed countries will tend to have more productive companies that are larger and stronger in the world market, and a state that will tend to have bigger resources for domination than others. Lenin’s five summary features of imperialism were posed as the key aspects of a single imperialist reality, not as independent factors that happen to coincide, and the monopolistic development of the world economy was key.

Monopoly power is good for the monopolist, but less so for the national economy in which it operates. Hence, there is usually a state policy against local monopolies and cartels, complete with legislation or regulatory bodies to limit the abuse of market power. This is a rational move on the part of state authorities for the working of the domestic capitalist system, since a stranglehold over the supply of key commodities and services by a few companies could be damaging for all the others. Marx had already noted in Capital that the establishment of monopolies in certain spheres had provoked ‘state interference’.

Probably the most famous early example of this was the Sherman Antitrust Act of 1890 in the US, although it took other state measures to limit the power of Rockefeller’s Standard Oil, a trust that refined 80% of the national US oil output and overwhelmingly dominated the production, transport and markets for a range of other oil and energy products. There have been further ‘anti-monopoly’ policies in the US in the past century, and in other countries that have agencies to investigate and rule on markets, such as the UK’s optimistically named Competition Commission, a successor to its Monopolies Commission. Yet these have done little to prevent a steady drift towards further monopoly power in most sectors of the economy. An extreme example is in South Korea, which has been dubbed ‘the Republic of Samsung’ by locals, since the company’s conglomerate structure, from road construction to oil rigs, to hotels, insurance and smartphones, accounts for a fifth of national output.

However, the concern a particular state might have about market domination in the domestic sphere does not extend to the operations of its companies in the international market. On the contrary, large companies get significant backing from their states for expanding their foreign business. The logic here is that the consequence of any exercise of monopoly power is another country’s burden, one that might even favour the home country via the improved profitability of the domestically based company. Apart from any technical cost advantages that might result from larger scale global operations, international expansion also enhances the global market position of the company, boosting its monopolistic power.

Perhaps the only exception to this lax international policy is where EU member states have adopted an anti-monopoly policy within the EU area, as a means to promote a large single market that is considered to be in member countries’ joint interests. Hence, there have been some (limited) measures against price fixing in the EU. That has not stopped widespread manipulation of the ‘free market’, as detailed in a study of some 20 cartels published in 2006.

The result of the trend towards monopoly is that the worldwide production of most of the key products and the provision of most of the key services of modern capitalism is today dominated by a small number of companies. Fewer than around 10 companies often control the bulk of global activity in many areas, despite the further opening up of the world market in the past 30 years. Here are some examples:

• Over half of global vehicle production in 2001 was attributable to just five companies, and 11 companies accounted for over 80% of output.

• In the case of beer, so to speak, just four companies provided over half the world’s consumption in 2009.

• Glencore, ahead of its merger with Xstrata in May 2013 was reported to be controlling ‘more than half the international tradable market in zinc and copper and about a third of the world's seaborne coal; was one of the world's largest grain exporters, with about nine percent of the global market; and handled three percent of daily global oil consumption’.

• In a more recently developed market, mobile phones, the degree of monopolisation is little different: in 2010, six companies accounted for just over 60% of global sales, with Nokia and Samsung having nearly half the market between them.

• Everybody knows about the domination of Apple, Microsoft and Amazon in their respective markets.

Naturally, the monopolistic corporations of the world are not equally distributed among countries. An UNCTAD report showed that of the top 100 international non-financial corporations in 2008, ranked by total assets, 75 had a ‘home’ in just six: the US (18), UK (15), France (15), Germany (13), Japan (9) and Switzerland (5).

None of this information is a big surprise. However, I though it was worth sharing as a further illustration of today’s imperialist world economy.

Tony Norfield, 14 June 2013